Download - Completing the Accounting Cycle
![Page 1: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/1.jpg)
Completing the Accounting Completing the Accounting CycleCycle
ACG 2021: Chapter 4ACG 2021: Chapter 4
![Page 2: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/2.jpg)
Completing the CycleCompleting the Cycle
Record entries in the journal
Post to the ledger Prepare trial balance Record and post
adjusting entries Prepare adjusted trial
balance
Prepare financial statements Income Statement Statement of
Retained earnings Balance Sheet Statement of Cash
Flows
![Page 3: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/3.jpg)
Financial StatementsFinancial Statements
Income statement Shows results of
operations for a period of time
Brady Corp
Income Statement
December 31, 2001
Revenues:
Fees earned $50,000
Expenses
Salaries exp $12,000
Rent expense 15,800
Supplies exp 7,200
Total 35,000
Net income 15,000
![Page 4: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/4.jpg)
Financial StatementsFinancial Statements
Statement of Retained Earnings Shows the changes in
the earnings of the corporation
Brady Corp
Statement of Retained Earnings
Dec 31, 2001
Beg RE $9,875
Add Net income 15,000
24,875
Deduct: dividends 10,000
Ending RE 14,875
![Page 5: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/5.jpg)
Financial StatementsFinancial Statements
Balance sheet Shows that the
accounting equation holds true
Snapshot of a moment in time
Three sections Assets Liabilities Shareholder’s Equity
![Page 6: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/6.jpg)
Balance SheetBalance Sheet
Brady Corporation
Balance Sheet
Dec 31, 2001
Assets: Liabilities:
Cash $12,705 Accts pay $7280
Accts rec 5,400 Loans pay 9800
Supplies 1,250 Total $17,080
Fixed assets 15,100
Total $34,455 Stockholder’s Equity
Capital stock $2,500
Retained earn 14,875
Total 17,375
TOTAL 34,455
![Page 7: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/7.jpg)
Financial StatementsFinancial Statements
Statement of Cash Flows
sources and uses of cash
Operating Investing Financing
Always prepared in the same order
![Page 8: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/8.jpg)
Closing EntriesClosing Entries
Real accounts Balances of accounts
reported on the balance sheet are carried forward from year to year
Temporary Balances of accounts
reported on the income statement not carried forwarded
We ZERO the account
![Page 9: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/9.jpg)
Closing EntriesClosing Entries
Income Summary Clearance account
used to process the closing entries
Four entries Close revenues Close expenses Close income
summary Close dividends
![Page 10: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/10.jpg)
Example:Example:Fees earned $10,000
Rent expense $2,000
Wages expense $6,000
Dividends $4,000
Retained earnings
$12,000
![Page 11: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/11.jpg)
Close RevenuesClose RevenuesDate Account PR Debit Credit
Dec 31
Fees earned 10000
Income summary
10,000
![Page 12: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/12.jpg)
Close ExpensesClose Expenses
Date Account PR Debit Credit
Dec 31
Income summary
8000
Rent expense 2000
Wages expenses
6000
![Page 13: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/13.jpg)
Close income summaryClose income summary
Exp $8,000 Rev $10,000
Balance $2,000
Income summary
![Page 14: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/14.jpg)
Close income summaryClose income summaryClose the amount of net income to retained earnings
Date Account PR Debit Credit
Dec 31
Income summary 2000
Retained earnings 2000
![Page 15: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/15.jpg)
Close dividendsClose dividends
Date Account PR Debit Credit
Dec 31
Retained earnings 4000
Dividends 4000
![Page 16: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/16.jpg)
Balance in Retained earningsBalance in Retained earnings
Retained Earnings
Dividends $4,000 $12,000 Beg Balance
2,000 Net income
$10,000 Ending balance
![Page 17: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/17.jpg)
Example 1Example 1Date Account P
RDebit Credit
Dec 31 Fees earned 20,000
Income Summary 20,000
Dec 31 Income summary 24,000
Rent expense 6000
Wages exp 8000
Misc exp 10000
![Page 18: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/18.jpg)
Example 1Example 1
Date Account PR Debit Credit
Dec 31 Retained earnings 4000
Income summary 4,000
Dec 31 Income Summary 3000
Dividends 3000
![Page 19: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/19.jpg)
Closing entriesClosing entries
After closing entries are posted Post Closing trial balance is prepared
![Page 20: Completing the Accounting Cycle](https://reader036.vdocuments.site/reader036/viewer/2022082712/56813b21550346895da3d5a9/html5/thumbnails/20.jpg)
Accounting YearAccounting Year
Calendar year – ends on December 31st Fiscal year – ends other than December
31st