1. Complete Steps 1-3 in Accounting Cycle
Principles of Cost Analysis and Management

2. Terminal Learning Objective
Action: Complete Steps 1-3 in the Accounting Cycle (Journalize, Post, Trial Balance).
Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international Learners):
Identify Steps in the Accounting Cycle
Translate Terminology (journal, ledger, debit, credit)
Record Transactions in Tabular Format under the Accrual Basis

3. Post-Closing Trial Balance
The Accounting Cycle
Record Transactions
Post-Closing Trial Balance
Post to Ledger
Close Accounts
Prepare Trial Balance
Prepare
Statements
Adjust Accounts
Adjusted
Trial Balance

4. LSA #1 Check on Learning
Q1. What is the first step in the Accounting Cycle?
A1.
Q2. What is the purpose of the Trial Balance?
A2.
Q1. What is the first step in the Accounting Cycle?
A1. Record Transactions
Q2. What is the purpose of the Trial Balance?
A2. To identify any errors that might have occurred in the recording or posting process

5. LSA #1 Summary
During this block, we went over the eight accounting cycles, which are:
Record Transactions
Post to Ledger
Prepare Trial Balance
Adjust Accounts
Adjusted Trial Balance
Prepare Statements
Close Accounts
Post-Closing Trial Balance

6. The Journal Accounting events are recorded in the Journal
The Journal is a chronological record of all transactions
Each transaction requires a journal entry
Each journal entry consists of at least one Debit and one Credit: “Double Entry” Accounting
Debit amounts must equal Credit amounts
Debit: an entry on the left-hand side of the account
Credit: an entry on the right-hand side of the account

7. Regarding Debits and Credits
Debits and credits are neutral
Debit ≠ decrease
Credit ≠ increase
It depends on the type of account
Some accounts types record increases with a debit, some record increases with a credit.
The side of the account which records an increase is the account’s NORMAL BALANCE.

8. “Normal” Account Balances
Assets = Liab + FinPosition ± Net Change
Net Change = Revenue – Expense, so:
Assets = Liab + FinPosition + Rev – Expense
+ Expense = Expense
(Add Expense to both sides)
Assets + Expense = Liab + FinPosition + Rev
Everything on the LEFT side of the equation increases with an entry to the LEFT side of the account

9. “Normal” Account Balances (Cont.)
Assets = Liab + FinPosition + Rev – Expense
+ Expense = Expense
(Add Expense to both sides)
Assets + Expense = Liab + FinPosition + Rev
Everything on the side of the equation increases with an entry to the side of the account
RIGHT
LEFT
RIGHT
LEFT

10. “Normal” Account Balances (Cont.)
Assets + Expense = Liab + FinPosition+ Rev – – – – –
debit
credit

11. LSA #2 Check on Learning Q1. What does “credit” mean? A1.
Q2. An increase to an expense is reflected with an entry on which side of the account?
A2.
Q1. What does “credit” mean?
A1. An entry on the right hand side of the account
Q2. An increase to an expense is reflected with an entry on which side of the account?
A2. Left hand or debit side.

12. LSA #2 Summary
During the facilitation of this block of instruction we covered on accounting events are recorded in the Journal, that Debits and Credits being neutral and review examples of normal account balances.

13. Anatomy of a Journal Entry
Date of Transaction
Amount Debited
Account Debited
Amount Credited
Posting
Reference
(Leave Blank)
Becoming fluent in Debits and Credits takes practice beyond the scope of this course. We will demonstrate a few journal entries to give you the flavor, and then proceed to Step 2.
Account Credited
Explanation of Transaction

14. Lacy’s Journal Transaction Description Cash + Other Assets = Liab
Financial Position
Rev –
Exp
Purchased Supplies
-65
+65
Transaction Description
Cash +
Other Assets =
Liab
Financial Position
Rev –
Exp
Purchased Supplies
-65
+65
Transaction Description
Cash +
Other Assets =
Liab
Financial Position
Rev –
Exp
Receives $200 Equity Transfer
+200
Transaction Description
Cash +
Other Assets =
Liab
Financial Position
Rev –
Exp
Receives $200 Equity Transfer
+200
Credit to Cash reflects a decrease in the Cash account.
Credit to Financial Position (right side) reflects an increase in the financial position account.
Debit to Other Assets (left side) reflects an increase in the Other Assets account.
Debit to Cash (left side) reflects an increase in the cash account.

15. The Ledger The LEDGER is a Summary of all Transactions By Account
We will represent each Ledger Account with a T-Account
A debit entry from the Journal is posted on the left side of the T-Account
A credit entry from the Journal is posted on the right side of the T-Account
The balance of an account is its excess of debits over credits (or vice versa)

16. Transaction Description
Lacy’s Ledger
Cash
Cash
Cash
Cash
Other Assets
Other Assets
Other Assets
Other Assets
Liabilities
Liabilities
Liabilities
Liabilities
(+)
200 15 5 50
130
(+)
200
(+)
200
(+)
(-) 20 10 5 65 40
(-)
(-)
(-)
(+) 20 65 40
140
(+) 20 65 40
140
(+) 20 65 40
140
(+)
(-) 5
(-) 5
(-) 5
(-)
(-) 40
(-) 40
(-) 40
(-)
(+) 40
(+) 40
(+) 40
(+)
Financial Position
Financial Position
Financial Position
Financial Position
Revenues
Revenues
Revenues
Revenues
Expenses
Expenses
Expenses
Expenses
(-)
(-)
(-)
(-)
(+)
200
(+)
200
(+)
(+)
(-)
(-)
(-)
(-)
(+) 15 20 50 85
(+)
(+)
(+)
(+) 10 5 15
(+)
(+)
(+)
(-)
(-)
(-)
(-)
After all transactions are posted, the Ledger Balances agree with our equation
Transaction Description
Cash +
Other Assets =
Liabilities
Financial Position
Revenues –
Expenses
Ending Balance
130
140
200 85 - 15

17. The Trial Balance
Lists all accounts and their balances in two-column format
Proves that Debits equal Credits
- Forces accountant to find errors before preparing statements
Provides a starting point for adjustments, statements and closing entries

18. Transaction Description
Lacy‘s Trial Balance
Account Title
dr.
cr.
 Cash
$130 
 Other Assets
140 
 Liabilities
$ ---
 Financial Position
200 
 Revenues
 85
 Expenses
 15
Totals
 $285
$285 
Our equation essentially show the same information as the Trial Balance:
Transaction Description
Cash +
Other Assets =
Liabilities
Financial Position
Revenues –
Expenses
Ending Balance
130
140
200 85 - 15

19. Debits and Credits
Debits and credits are used in accounting systems to reflect changes in accounts
It’s not necessary to memorize debits and credits to understand the effects of transactions
We will rely on the equation and T-Accounts to illustrate transactions

20. Accounting Cycle Spreadsheet
Journal entries may be entered by hand
(this step is optional)

21. Accounting Cycle Spreadsheet (Cont.)
Post transactions to T-Accounts
Balances calculate automatically

22. Accounting Cycle Spreadsheet (Cont.)
The Trial Balance is generated automatically from the T-Accounts.
Note that
debits = credits

23. Practical Exercise / Review

24. LSA #3 Check on Learning
Q1. A decrease to Cash is recorded on which side of the Cash account?
A1.
Q2. The summary of transactions by account is called the…?
A2.
Q1. A decrease to Cash is recorded on which side of the Cash account?
A1. Right side or credit side
Q2. The summary of transactions by account is called the…?
A2. Ledger (represented here by T-accounts)

25. LSA #3 Summary
During this lesson, we discussed the 8 steps of the accounting cycle (AC) and gave an in-depth description of each. Various terminologies associated with the AC were defined and explained. Finally, several account balance formulas were viewed using T-accounts, and the transactions recorded as a Journal Voucher Entry.

26. TLO Summary
Action: Complete Steps 1-3 in the Accounting Cycle (Journalize, Post, Trial Balance).
Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international Learners):
Identify Steps in the Accounting Cycle
Translate Terminology (journal, ledger, debit, credit)
Record Transactions in Tabular Format under the Accrual Basis