BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF A SERVICE BUSINESS

Accounting Cycle

A continuous process of accumulating, summarizing, and reporting financial information

Official Receipt or Cash Receipt

This document is used when a business receives money or a check. It acknowledges that money or a check have been received.

Charge Invoice / Sales Invoice

A document used when a service has been rendered, but the client will be billed only after a certain number of days from the date of service.

Check or Cash Voucher

A document used when a check is issued to pay a certain supplier or vendor

Transaction and / or events

Identification and measurement of external transactions and internal events.

Preparation of Journal Entries (Journalizing)

Business transactions are recorded in the journal using debits and credits.

Posting

Posting of journal entries to general ledgers.

Unadjusted Trial Balance

Preparation of unadjusted trial balance

Adjusting Entries

A journal entries that bring the accounts up to date. One purpose of it is for income and expenses to to be reported in the correct period.

Deferred Expenses or Prepaid Expenses

These are items that have been initially recorded as assets but are expected to become expenses over time or through the operations of the business.

Statement of Financial Position (SFP)

Also known as the Balance Sheet. This statement includes the amounts of the company’s total assets, liabilities, and owner’s equity which in totality provides the financial position of the company on a specific date.

Statement of Comprehensive Income (SCE)

Also known as the Income Statement. Contains the result of the company’s operations for a specific period of time. This can be prepared on a monthly, Quarterly, or Yearly basis.

Statement of Changes in Equity (SCE)

This statement is prepared prior to the operation of the Statement of Financial Position in order to obtain the ending balance of the equity to be used in the SFP. All changes, whether increases or decreases for the owner’s interest on the company during the period, are reported here.

Cash Flow Statement

Provide an analysis of inflows and/or outflows of cash from/to operatinfg, investing, and financing activities.