Unit 2 · Double-Entry System & Ledger Accounts
2-5 The Full Accounting Cycle
“You are now the accountant.” The book’s own words on p.49, above eight transactions and four pages of blank tables. This lesson works that case from end to end — and then runs the identical machine over the one the book has already answered, to see whether the method agrees with a page it was never told about.
Guiding question
How do you know your own working is right when nobody has printed the answer? (pp.49–51, 54–56)
Learning outcome. By the end you can take a set of transactions from a written scenario through analysis, journal, ledger and trial balance without help, check the result two independent ways, and say what the balanced total does and does not establish.
Everything in Unit 2 has been one stage of a single process. Here it is whole:
1 · Analyse
lesson 2-1
What was received? What was given? Which accounts?
2 · Journalise
lessons 2-2, 2-3
Classify each account, apply the rule, write the entry with its date and narration.
3 · Post
lesson 2-3
Gather the entries by account and balance each one.
4 · Extract
lesson 2-4
List the balances in two columns and add them up.
Each stage consumes the previous one’s output, which is why the order is not a preference. You cannot journalise an event you have not analysed, post an entry you have not written, or extract a balance from an account you have not posted. And when something comes out wrong at stage 4, the fault is almost never at stage 4 — it is a stage-2 or stage-3 mistake arriving late.
Two businesses, one machine. Amal Trading is the book’s own exercise on p.49 — eight transactions and four pages of empty tables, with no answers printed anywhere. Al Noor Trading on p.54 is worked in full, finishing at 160,000 on p.55.
Do Amal first, working each stage yourself before pressing. Then switch to Al Noor and watch the same four stages land on the book’s figures.
The whole cycle, on two businesses
Four stages, one machine, two sets of transactions. Solve the one the book leaves blank — then run the same four stages over the one it has already answered, and see whether your method agrees with it.
p.49 — the book gives eight transactions and blank tables. Amal started a wholesale trading business, and these are her March transactions. The book sets this as your task and prints no answers, so everything below is worked from the transactions.
1. The owner invested EGP 150,000 cash in the business.
Dr Cash150,000
Cr Capital150,000
balances — 150,000 each side
Cash arrives; the owner’s claim grows by the same amount.
Amal Trading — trial balanceDr 255,000 · Cr 255,000
The book prints no answer for this one. Yours should foot to 255,000 on both sides.
🧮 The two entries in Amal that catch people — 5 and 8
- 1
Transaction 5: goods sold on credit for 30,000. Dr Debtors 30,000 · Cr Sales 30,000.
Why this step: The sale is complete — the goods have gone and the customer owes. Revenue is recorded now, with no cash anywhere in the entry. This is the accrual basis from lesson 1-1 doing its job.
- 2
Transaction 8: 10,000 collected from a customer for those credit sales. Dr Cash 10,000 · Cr Debtors 10,000.
Why this step: Cash arrives and the right to be paid shrinks by the same amount. Two assets, opposite directions — exactly like buying equipment for cash.
Most people slip here: There is NO sales entry here. The commonest error in this whole exercise is crediting Sales again, which would report 90,000 of revenue on 80,000 of actual sales.
- 3
Check the pair against each other: Debtors is debited 30,000 and credited 10,000, leaving 20,000 Dr.
Why this step: That 20,000 is a real thing — it is what customers still owe Amal at the end of March, and it will sit in the assets on her position statement.
- 4
Now compare with transaction 6: 15,000 paid to suppliers, Dr Creditors · Cr Cash.
Why this step: The same shape, seen from the other side. Transaction 8 collects a debt owed TO the business; transaction 6 settles one owed BY it. Both reduce a balance rather than creating revenue or expense, and neither touches the profit at all.
The real question p.49 raises is not can you post eight transactions — it is how do you know you got it right? There are four checks available, and none of them needs an answer key.
1 · Every entry balances on its own
Before totalling anything. Eight entries, each with equal debits and credits — a fault here is caught immediately rather than at the end.
2 · The trial balance foots
Amal comes to 255,000 both sides. Necessary, and — as Unit 2 has spent two lessons showing — nowhere near sufficient.
3 · Every balance is on its normal side
Assets and expenses debit; liabilities, capital and revenue credit. A creditors account with a DEBIT balance would mean Amal had overpaid a supplier — possible, but it demands an explanation.
4 · Every balance means something you can say out loud
Debtors 20,000 = “customers still owe us 20,000”. Cash 127,000 = “this much is in the bank”. A balance you cannot narrate is one you should re-derive.
Where the comparison breaks down: A translation can be idiomatic in several defensible ways. A trial balance has exactly one right answer for a given set of transactions, which makes these checks sharper than anything available to a translator.
Mark each statement ○ if it is true or × if it is false. Decide before you press.
Collecting 10,000 from a credit customer is recorded as revenue.
A sale on credit and the later collection of the money are two separate transactions.
Amal’s trial balance balancing at 255,000 proves her books are correct.
A debit balance on a Creditors account would be unusual and needs explaining.
Paying a supplier and collecting from a customer both leave profit unchanged.
Running the same method over a case with a printed answer tests the method rather than the arithmetic.
Match each description with the choice that fits it.
Goods sold on credit for 30,000.
10,000 collected from a credit customer.
15,000 paid to suppliers.
Salaries of 8,000 paid in cash.
Exam-style — take a scenario through all four stages
A trader: (i) invests 80,000 cash; (ii) buys goods on credit for 25,000; (iii) sells goods on credit for 18,000; (iv) collects 7,000 from that customer; (v) pays 4,000 rent in cash.
Write the journal, post the ledger, extract the trial balance — and then check the cash balance a second way, without re-adding the ledger column.
One of you reads out a transaction from Amal’s list; the other gives the entry from memory, then says which of the four checks would catch it if they had got it wrong. Transactions 5, 6 and 8 are the ones worth arguing about — all three leave the trial balance balanced whichever way you record them, so only checks 3 and 4 would find the error.
How the real paper is built
The ministry sets half multiple choice and half written answer in every subject. The two halves are not the same skill. In the multiple-choice half you have to spot the wrong options quickly — and the wrong options are built out of the mistakes students really make. In the written half nobody gives you the answer to recognise; you have to produce it, in your own words, with a reason.
Practise both. Being good at one half and weak at the other costs you exactly half the paper.
In a New Context
A classmate posts Amal’s eight transactions and gets a trial balance that foots perfectly — but records transaction 8 as Dr Cash 10,000 · Cr Sales 10,000.
State the total their trial balance would show, and say whether it balances. Then identify two account balances that are now wrong and by how much, and say which of the four checks in this lesson would have caught it — and which would not.
Lesson Question — Answered
How do you know your own working is right when nobody has printed the answer?
You use four checks, none of which needs a key. Every entry balances on its own. The trial balance foots — Amal’s at 255,000. Every balance sits on its normal side. And every balance says something you can state out loud: customers still owe us 20,000. Only the fourth can catch a transaction that was analysed wrongly, because it is the only one that reaches outside the arithmetic.
Then you do the thing this lesson was really built around: you test the machine, not the sum. Running the identical four stages over Al Noor Trading — a case the book has worked — produced seven balances matching seven printed independently on p.55, and a total of 160,000. That is corroboration from a second source, and it is the only evidence available for Amal, where there is nothing to compare against.
But keep the conclusion the right size. Al Noor contains no credit sale and no collection from a customer — the two entries most likely to be got wrong in Amal. So what the check earns you is my method works on cases like this one, never my method works. And a balanced 255,000 still establishes only that every entry had both halves, which is the question Unit 2 closes with.
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