Dubai Women's Campus BUS 1503 Accounting for Managers BUS 1503 - Accounting for Managers Class Notes -3 The Recording Process There are several steps before a company can actually prepare its financial statements. Step 1: Preparing journal entries (Journalizing transactions). It is the process of recording transactions in a book called the journal. The transaction date, the names of the accounts involved, the amount of debit and credit are recorded for each transaction Step 2: Posting the journal entries into another book called the Ledger. A Ledger is the collection of all accounts used by a business. It provides a summary of each account i.e. debits, credits , and the balance of each Account Step 3: Preparing a Trial Balance It is a summary of the ledger that lists the accounts and their balances; the total debit balances should equal the total credit balances. Step 4: Preparing Financial statements. (Income Statement, Statement of changes in Owner's equity, and Balance sheet). The Accounting Cycle 4. Financial statements 1. Journal Entries T 3. Trial Balance 2. Posting to the Ledger Preparing Journal entries, Posting to Ledger & Preparing a Trial Balance Demonstration Example: Mr. Ali graduated from College and opened a Management consultancy firm called "Insight Consultancy services" to provide training for various firms in Dubai. Following are some of the transactions that took place in the first month of operations. 2010 Jan 1 Invested AED 50,000 cash and a personal computer worth AED 5,000 into the business. Jan 3 Purchased office furniture for AED 4,000 on credit from Modern Furniture traders. Jan 4 Purchased Office supplies for AED. 2,000 cash Jan 5 Paid Rent for office space AED. 12,000 for the whole year. Jan 6 Paid AED.500 for an advertisement which appeared in "Khaleej Times" announcing the opening of the business. Jan 7 Paid insurance premium of AED. 1,200 for a Fire insurance policy which is valid until Dec 31, 2008. Jan 10 Billed a client Ms. Aisha for AED 5,000 for a seminar conducted on Jan 8. Ms. Aisha is expected to pay at the end of the month. Jan 11 Bought office supplies on credit from Ahmed Brothers for Dh.500. Jan 15 Received cash AED 10,000 from Orion Trading company for a training program to be conducted in early February. Jan 17 Paid Modern Furniture Traders the amount owed. Jan 20 Received cash from Ms. Aisha for services performed earlier. Jan 22 Billed a client Mr. Omar for consultancy services rendered AED 5,500. Jan 25 Received a telephone bill for AED 1,500. Jan 29 Withdrew AED 2,000 from the bank for personal use. Jan 30 Paid Salaries to employees AED 4,800 for the month. First step of the accounting cycle [Prepare JOURNAL ENTRIES] Write your Journal Entries here: Date Description Ref. Debit Credit