Accounting Cycle with Formats

An accounting cycle is a complete sequence beginning with the recording of transaction and ending with preparation of financial statements i.e. profit & loss A/c and balance sheet.

Steps involved in Accounting cycle

1. Journalizing           : Involves identifying Debit and Credit aspects in each transaction and recording it in the journal.

The Format Of A Journal Is Shown Below

Date	Particulars	L.F.	Debit Amount	Credit Amount
1	2	3	4	5

2. Ledger posting       : Transfer of transaction from journal to their respective accounts opened in Ledger.

Format Of Ledger

Dr. [Debit Side]                                                                      [Credit Side] Cr.

Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	‘To’				‘By’

3. Balancing               : Ascertainment of the difference between the total of Debit and credit column of a ledger account.

Dr.                               David’s Account (Personal A/c)                                Cr

Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Cash		300		By Purchase		800
	To Balance c/d		500
			800				800
					By Balance b/d		500

4. Trial Balance         : This is a summary of ledger accounts. It involves preparation of list showing the balances of each and every account to verify whether the sum of the debit is equal to the sum of the credit balance to ensure arithmetical accuracy.

Trial Balance of …………………….as on ……………….

Sl. No	Name of the Account	Ledger	Debit Balance	Credit Balance
	I. Personal Accounts:
1.	Capital			Cr
2.	Drawings		Dr
3.	Trade Debtors		Dr
4.	Trade Creditors			Cr
5.	Bank Balance		Dr
6.	Outstanding Exp.			Cr
7.	Prepaid Exp		Dr
8.	Accrued incomes		Dr
9.	Income received in Advance			Cr
10.	Bills payable			Cr
	II. Real Accounts:
1.	Opening Stock		Dr
2.	Goodwill		Dr
3.	Trade Mark		Dr
4.	Bills Receivables		Dr
5.	Buildings		Dr
6.	Furniture, Machinery		Dr
7.	Investments		Dr
	III. Nominal Accounts
1.	Purchases		Dr
2.	Purchase returns			Cr
3.	Sales			Cr
4.	Sales Return		Dr
5.	Expenses A/c		Dr
6.	Losses A/c		Dr
7.	Income A/c			Cr
8.	Profit A/c		Dr
	IV. Provision & Funds / Reserves All types of Reserves/Funds			Cr

5. Trading, Profit

-and loss account   : It is prepared to ascertain the profit and loss for the financial year. It reflects operation results.

I. Horizontal form/Account format

Profit & Loss Account of ………………for the year ending 31.03.2012

Dr.                                                                                                  Cr

Particulars	Amount		Particulars	Amount
To gross Loss b/d (if any) (Transferred to Trading A/c)	XX		By Gross Profit b/d (transferred to Trading A/c)	XX
To Salaries	XX		By Discount Received	XX
To Rent, rates, Taxes & Insurance	XX		By Interest Received	XX
To Printing and Stationary	XX		By Commission Received	XX
To Postage & Telegram & Telephone	XX		By Rent Received	XX
To Legal Charges	XX		By Apprenticeship Premium	XX
To General Expenses (Selling & Distribution Expenses)	XX		By Interest on Drawings	XX
To Carriage Outwards/on sales	XX		By Profit on sale of Assets	XX
To Advertising	XX		By Other Receipts (if any)	XX
To Traveler’s Salaries, Expenses & commission	XX		By Net Loss (Transferred to Capital Account)
To Bad Debts	XX
To Bank charges (Depreciation & Maintenance)	XX
To Depreciation	XX
To Repairs & Maintenance (Financial Expenses)	XX
To Discount Allowed	XX
To Interest on Capital	XX
To Interest on Loans (Abnormal Expenses)	XX
To Loss due to fire Accident	XX
To Loss on Sale of Assets	XX
To Net Profit (Transferred to Capital Account)	XX
	XX			XX

(ii) Vertical/Statement format Profit & Loss Account

Profit & Loss Account of ………………for the year ending 31.03.2012

Particulars	Amount	Amount
I) Gross Profit/Gross Loss (if any)		XXX
II) Add: Operating Incomes    Discount received    Commission received    Apprenticeship Premium    Interest on Drawings	XXX XXX XXX XXX	XXX
III) Less: Operating Expenses    Management Expenses    Selling & Distribution Expenses    Depreciation & Maintenance    Financial Expenses      (A) Operating Profit(I+II-III)	XXX XXX XXX XX	XXX XXX
IV) Add: Non Operating Incomes    Bank Interest    Rent Received    Profit on sale of assets	XXX XXX XXX	XXX XXX
V) Less: Non Operating Expenses    Loss due to Fire Accident    Loss on Sale of Assets	XXX XXX	XXX XXX
Net Profit/loss (A+IV-V) (Transferred to Capital Account)		XXX
		XXX

6. Balance sheet         : Preparation of Balance sheet to ascertain the financial position of the business at the end of the financial year.

I. Horizontal form/Account format

Balance Sheet of ………………as on 31.03.2012

Liabilities	Amount		Assets	Amount
(Current Liabilities) Bank Over Draft Out Standing Expenses Bills Payable Creditors Income Received in advance (Long term liabilities) Mortgage Loan Bank Loan Loan from Family members Capital                     XXX Add: Net Profit        XXX      (OR) Less: Net Loss         XXX Less: Drawings        XXX	XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX		(Current Assets) Cash in Hand Cash at Bank Investments/Securities Bills receivable Debtors Pre paid expenses/Incomes to be received (Fixed Assets) Furniture & Fixtures Tools and equipment Motor Vehicles Plant & Machinery Land & Buildings Lease hold premises (Intangible Assets) Trade marks Patents Copy rights Good will	XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
	XXX			XXX

II. Format of Balance Sheet in order of Permanency

Balance Sheet of ………………as on 31.03.2012

Liabilities	Amount		Assets	Amount
Capital Add: Net Profit     XXX    (or) Less: Net Loss      XXX Less: Drawings     XXX (Long term liabilities) Mortgage Loan Bank Loan Loan from Family Members (Current Liabilities) Bank Over Draft Out Standing Expenses Bills Payable Creditors Income received in advance	XXX XXX XXX XXX XXX XXX XXX XXX XXX		(Intangible Assets) Trade marks Patents Copy rights Good will  (Fixed Asset) Furniture & Fixtures Tools and equipment Motor Vehicles Plant & Machinery Land & Buildings Lease hold premises (Current Assets) Cash in Hand Cash at Bank Investments/securities Bills receivable Debtors Pre paid expenses Incomes to be received	XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
	XXX			XXX

II. Format of Balance Sheet in order of Permanency

Balance Sheet of ………………as on 31.03.2012

Particulars	Amount	Amount
I) Fixed Assets    Furniture & Fixtures    Tools and equipment    Motor Vehicles    Plant & Machinery    Land & Buildings    Lease hold premises II) Current Assets    Cash in Hand    Cash at bank    Investments/securities    Bills receivable    Debtors    Pre paid expenses    Accrued incomes/ Incomes to be received III) Intangible Assets    Trade marks    Patents    Copy rights    Good will       Total Assets I) Capital    Add: Net Profit    Less: net Loss    Less: Drawings II) Long term liabilities    Mortgage Loan    Bank Loan    Loan from Family members III) Current Liabilities    Bank Over Draft    Out Standing Expenses    Bills Payable    Creditors    Income received in advance	XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX	XXX XXX XXX XXX XXX XXX XXX
Total		XXX