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Review of Bookkeeping Skills
For EBS Exam
Analyzing and Recording Transactions
Analyzing and Recording Process
1. Analyze each transaction and event from source documents
2. Record relevant transactions and events in a journal
3. Post journal information to ledger accounts
4. Prepare and analyze the trial
Source Documents
Checks
Bills from Suppliers
Purchase Orders
Bank Statements
Sales Tickets
Employee Earning Records
The Account and Its Analysis
An account is a record of increases and decreases in a specific asset,
liability, equity, revenue or expense item
The general ledger is a record containing all accounts used by the
company
Asset Accounts
Review of Bookkeeping Skills 1
Cash
Land
Buildings
Equipment
Accounts Receivable
Notes Receivable
Prepaid Accounts
Supplies
Liability Accounts
Accounts Payable
Notes Payable
Unearned Revenue
Accrued Liabilities
Equity Accounts
Owner’s Equity
Owner’s Withdrawals
Revenues
Expenses
Owner’s Capital
Debits and Credits
A T-account represents a ledger account and is a tool used to understand
the effects of one or more transactions.
The left side of a T-account is the debit side
The credit side of a T-account is the credit side
Journalizing & Posting Transactions
1. Analyzing transactions and source documents
Review of Bookkeeping Skills 2
2. Apply double-entry accounting
3. Record as a journal entry
4. Post the entry to ledger
Preparing a Trial Balance
1. List each account title and its amount (from ledger) in the trial balance. If an
account has a zero balance, list it with a zero in the normal balance column
(or omit it entirely).
2. Compute the total of debit balances and the total of credit balances.
3. Verify total debit balances equal total credit balances.
Searching for and Correcting Errors
If the trial balance does not balance, the error(s) must be found and corrected.
1. Make sure the trial balance columns are correctly added
2. Make sure account balances are correctly entered from the ledger
3. See if debit or credit accounts are mistakenly placed on the trial balance
4. Re-compute each account balance in the ledger
5. Verify that each journal entry is posted correctly
6. Verify that each original journal entry has equal debits and credits
Presentation Issues
1. Peso signs are not used in journals and ledgers
2. Peso signs appear in financial statements and other reports such as trial
balances. The usual practice is to put Peso signs beside only the first and
last numbers in a column.
3. When amounts are entered in the journal, ledger, or trial balance, commas
are optional to indicate thousands, millions and so forth.
4. Commas are always used in financial statements.
5. Companies commonly round amounts in reports to the nearest Peso, or
even to a higher level.
Review of Bookkeeping Skills 3
Debt to Assets Ratio
Evaluates the level of debt risk
A higher ratio indicates that there is a greater probability that a company
will not be able to pay its debt in the future
Accounting for Merchandising
Service Companies
Service organizations sell time to earn revenue
Revenues - Expenses = Net Income
Merchandising Companies
Merchandising companies are wholesaler or retailer businesses
Reporting Income for a Merchandiser
Merchandising companies sell products to earn revenue
Net sales - Cost of Goods Sold = Gross Profit - Expenses = Net Income
Operating Cycle for a Merchandiser
Begins with the purchase or merchandise and ends with the collection of
cash from the sale of merchandise
Inventory Systems
Review of Bookkeeping Skills 4
Perpetual and Periodic Inventory Systems
Perpetual systems
Continually update accounting records for merchandising transactions
Periodic systems
Accounting records relating to merchandise transactions are update only at
the end of accounting period
Trade Discounts
Trade discounts used by manufacturers and wholesalers to offer better prices
for greater quantities purchased
Purchase Discounts
Purchase discounts are when a deduction from the invoice price granted to
induce early payment of the amount due.
Purchase Returns and Allowances
Review of Bookkeeping Skills 5
Purchase Return
Merchandise that are returned by the buyer to the supplier
Purchase Allowance
A reduction in the cost of defective merchandise received by a buyer from
a supplier
Transportation Costs and Ownership Transfer
Transfer of ownership to buyer
Terms Transportation costs paid by
when goods are passed to
FOB shipping
Carrier Buyer
point
FOB destination Buyer Seller
Income Statement Formats
Multiple-step income statement
Review of Bookkeeping Skills 6
Single-step income statement
Review of Bookkeeping Skills 7
Review of Bookkeeping Skills 8
