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Intro To Accounting
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Intro To Accounting

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Transcript

  • 1. ACCOUNTING CYCLE
  • 2. Definition: Process by which accountants prepare  financial statements for an entity for a  specific period of time
  • 3. Identifying & Analyzing Transactions Prepare the  COMPANY NAME Work Sheet For the Month Ended December 31, 2008 worksheet which  Unadjusted Trial Adjusted Trial Balance Sheet and Statement of Changes in is used to help  Account Title Balance Debit Credit Adjustments Debit Credit Balance Debit Credit Income Statement Owner's Equity Debit Credit Debit Credit move data from  the trial balance  to the financial  statements
  • 4. Recording Adjusting Entries Work sheet helps identify accounts that need  adjustments Actual adjustment of accounts requires journalizing  and posting entries Transactions are recorded as a debit and a credit
  • 5. GENERAL JOURNAL DATE DESCRIPTION REF DEBIT CREDIT Oct 8 Salary Expense 1000 Salary Payable 1000 8 Supplies Expense 500 Expense 500
  • 6. Trial Balances Prepare  1st trial balance:  Debits  = Credits Adjusting entries Prepare adjusted trial balance Salary Expense Supplies 1,000 1200 Adj. 800 Adj. 500 Bal. 400 Bal. 1,500 Clo. 1,500
  • 7. Financial Statements Income Statement Statement of retained earnings Balance Sheet Cash Flow Statement
  • 8. Learn from the financial statements: Is the business solvent? Is there enough cash for the day‐to‐day running of the  business? Is a bank overdraft facility needed? Should more capital be invested? Has the business been financed with too much long‐ term debt?
  • 9. Closing Entries  Income and expense accounts must be closed at the  end of each period to  determine profit/loss for the  period They begin and end each accounting period with a  zero balance
  • 10. After‐Closing Trial Balance Reflects all accounts with balances after the closing  process Assets Liabilities Equity TOTAL DEBITS MUST EQUAL TOTAL CREDITS