Step 1 - Analyzing business transactions from source documents

Step 2 - Journalizing business transactions

Step 3 - Posting to the general ledger

Step 4 - Preparing a trial balance

Step 5 - Preparing a work sheet

Step 6 - Journalizing and posting adjusting entries

Step 7 - Preparing financial statements

Step 8 - Journalizing and posting closing entries

Step 9 - Preparing a post-closing trial balance

Step 10 - Journalizing and posting reversing entries

4.1.1  Analyzing business transactions from source documents

·         Business transactions – financial events that changes the assets, liabilities, and equity of a business entity

·         Business documents – source documents that serve as basis for recording business transactions

BUSINESS DOCUMENTS

• Purchase requisition - Sales Dept to Purchasing Dept List of goods to be ordered, List of items needed by the requesting department

• Purchase order - Buyer, Seller Order of goods

• Receiving report - Receiving Dept, Purchasing Dept After inspection, to show the quantity and condition of the goods received.

• Invoice

  • Sales Invoice - Seller, buyer Delivery of goods

  • Purchase Invoice - Buyer, Seller Delivery of goods

• Credit note - seller, buyer, return of goods or for allowances

• Debit note - buyer, seller return of goods or for allowances

• Statement of account - seller, buyer, reminder request to pay

• Remittance advice - buyer, seller, inform that payment is made

• Receipt - seller, buyer, receive payment

• Promissory note - seller, buyer, receive payment

• Voucher - payments made either by cash or by cheque

• Petty cash voucher - payments from petty cash fund

• Inventory take sheet/Stock take sheet - inventory count, basis for recording ending inventory

Return - actual return of goods

Allowance - No actual return of goods but a mere request for a price reduction

Reasons for returns & allowances:

Damaged goods, Damage of goods during delivery, Wrong specifications (size, color, shape)