This book is dedicated to accounting students, especially those in the early semesters, who want to understand the material on accounting principles, particularly in preparing financial statements. The book content has been designed to make learning easier for students from non-accounting educational backgrounds. This book will first discuss basic accounting for service companies before continuing to material accounting principles for merchandise companies.
The material contents are designed according to the accounting cycle, which starts from transaction analysis, journalizing, ledger and posting, trial balance before adjustment, adjustment journal, adjusted trial balance, financial statements, closing journal, post-closing trial balance, and reversing entries. In transaction analysis, all company activities are essential; however, not all activities can be recognised in accounting records. The topic of transaction analysis here will elaborate on details related to whether a business activity is recorded. Next, journalizing will discuss the concepts of debit and credit, accounts, journal forms, and preparing journal entries. After that, there is a process of transferring (posting) into the ledger. Therefore, each ledger will produce a trial balance. The trial balance needs to be adjusted because some accounts do not accurately reflect the actual conditions as of the financial reporting date. The Adjustment Journal will discuss in detail the reasons for the need for adjustments and how to adjust. The next material relates to the preparation of Financial Statements, Closing Journal and Reversing Journal. All these materials are first specialised for service companies.
Once students understand how to complete the accounting cycle in a service company, it will be easier to grasp the basis of accounting for a merchandise company. The accounting cycle of a merchandise company is similar to that of a service entity, beginning with transaction analysis, journalizing, posting to the ledger, preparing a trial balance, making adjustments, generating financial statements, closing the journal, and preparing the reversing journal. Therefore, the following material will focus more on the accounting process that service companies have not discussed. In a merchandise company, there is merchandise inventory that a service company does not have. Therefore, there is a detailed discussion related to inventory consisting of 1) inventory characteristics; 2) inventory recording methods (perpetual system and periodic system); 3) cost of goods sold concept; 4) profit or loss calculation; and 5) financial statements of merchandise companies. This book also discusses special journals and subsidiary ledgers, which are helpful for service and merchandise companies.
The goal of this book is for students to be able to create simple financial statements for service companies and merchandise companies by implementing the accounting cycle. The Financial Statements are still in simple forms, comprising the Income Statement, Retained Earnings Statement, and Statement of Financial Position. The Statement of Retained Earnings is part of the Statement of Changes in Equity. This book excludes material on the Statement of Changes in Equity to make it easier for students to comprehend the accounting cycle. Therefore, the Retained Earnings Statement is still highlighted. If students have a good understanding of the materials in this book, then they can learn advanced levels of accounting by reading other reference books related to intermediate financial accounting