This document provides an overview of fundamentals of accounting and the accounting cycle. It discusses journalizing business transactions, which involves analyzing transactions from source documents, recording them in the journal in date order, and posting them to ledgers. Transactions are either financial, affecting assets, liabilities or equity, or non-financial. The accounting cycle then involves preparing trial balances, adjusting entries, financial statements, and closing entries to complete the cycle.

1. Fundamentals
of ABM 1

2. Prayer
Lord, we offer to you our class today. We pray
that through your Divine Guidance, we would
learn how to listen attentively to the inputs of
our teacher. May we participate actively in the
discussions and activities, so we could learn
more while having fun. May we value each
other’s contributions as a building block
towards harmony and peace. All these we ask
in your powerful name. Amen.

3. Kamustahan

4. Topics
Nature of
Transaction
Journalizing
Business
Transactions
01 02

5. Accounting Cycle
1. Analyzing business transactions from source
documents
2. Journalizing the business transactions
3. Posting journal entries to the ledger
4. Preparing trial balance
5. Journalizing and posting adjusting journal entries
6. Preparing adjusted trial balance
7. Preparing financial statements
8. Journalizing and posting closing entries
9. Preparing post-closing trial balance
10. Journalizing and posting reversing journal entries

6. Accountants will analyze business
documents whether they have a financial
impact or none in the business. The
transactions which are only financial in
nature and have an economic benefit to the
business and those which may change
assets, liabilities, and equity will be
recorded.

7. Examples of financial transactions
● Payment of salaries of employees
● Payment of electric, water, and
telecommunication bills
● Received payment from customers
● Received payment from customers on
account
● Payment for purchasing furniture,
equipment, and supplies

8. Examples of non-financial
transactions
● Orientation of newly-hired employees
● Posting of advertisements in the city
● Awarding of recognition to the
business
● Hiring and terminating of employees

9. The following are examples
of source documents
1. Official receipt or cash receipt
2. Charge invoice or Sales invoice
3. Check or Cash voucher
4. Deposit slips

10. Activity
Write FINANCIAL if the transaction is a financial
transaction. Write NONFINANCIAL if the
transaction is not.
1. The owner paid the salaries of the employees.
2. The owner conducted an orientation to newly
hired employees.
3. The owner paid electric, water, and
telecommunication bills.
4. The owner received payment from customers.
5. The owner post advertisements in the city.

11. Activity
Write FINANCIAL if the transaction is a financial
transaction. Write NONFINANCIAL if the transaction is
not.
6. The owner awarded Employee of the Month to a
deserving employee.
7. The owner purchased a furniture and paid it in
cash.
8. The owner received payment from customers on
account.
9. The owner signed the contract to new supplier.
10. The owner withdrew cash from the business.

12. Journal
● The journal is the accountant’s tool in
recording the day-to-day transactions.
● It is called the book of original entry, where
the accountant records first the business
transactions that occurred in the business.
● The recording of business transactions is in
sequential form.

13. Journal Format
1. Date. Enter the date when the
transaction occurred. The year and
month may be omitted if the
transaction occurred in the same
year and month.

14. Journal Format
2. Account Titles and Explanation. First,
enter the account to be debited. It must
be located at the extreme left of the first
line, while the account to be credited
must be located at the next line which is
slightly indented. A brief description of the
transaction is usually made on the line
below the credit. Generally, skip the line
after each entry.

15. Journal Format
3. P.R. (Posting Reference). The chart of
accounts provides account numbers
for each account title. The accountant
will enter those account numbers in
this column once the account titles are
used in a journal entry.

16. Journal Format
4. Debit. The amount to be debited is
entered in this column.
5. Credit. The amount to be credited
is entered in this column.

18. A simple journal entry is a journal entry
which has one debit account and one
credit account.

19. A compound journal entry is a journal entry
with more than one debit account or more
than one credit account, or both.

20. Activity
Write TRUE if the statement is correct and
FALSE if it is not.
1. The journal is called the book of original entry
where transactions are first recorded.
2. Source documents are important in
journalizing.
3. If the accountant mistakenly analyzed the
transaction, it would result to a wrong journal
entry.

21. Activity
Write TRUE if the statement is correct and
FALSE if it is not.
4. The peso sign is always written before every
amount in a money column to avoid
confusion.
5. Journal entries require an explanation.
6. Transactions are journalized based on
analysis as to their effects on assets, liabilities,
owner’s equity, revenue, and expense.

22. Activity
Write TRUE if the statement is correct and
FALSE if it is not.
7. Only the two-column journal is being used in
accounting.
8. Accountants must record the transaction
with supporting documents such as the
official receipts, sales invoice, and payroll
registers.

23. Activity
Write TRUE if the statement is correct and
FALSE if it is not.
9. A compound entry has two or more debits
and credits.
10. A transaction may be recorded on the day of
recording and not on the day when the
transaction occurred.

24. Let’s try!