Transcript THE ACCOUNTING CYCLE

THE ACCOUNTING CYCLE
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FINANCIAL TRANSACTION OCCURS
RECORD TRANSACTIONS IN GENERAL JOURNAL
POST TO THE GENERAL LEDGER
RECORD ADJUSTING ENTRIES IN GENERAL
JOURNAL
• PREPARE FINANCIAL STATEMENTS
• RECORD CLOSING ENTRIES IN GENERAL JOURNAL
• START OVER
FINANCIAL TRANSACTION OCCURS
• BUYING OR SELLING SOMETHING FROM AN
EXTERNAL PARTY
• BORROWING OR PAYING OFF DEBT
• OWNERS PUTTING IN OR TAKING OUT MONEY
RECORD TRANSACTION IN GENERAL
JOURNAL
• GENERAL JOURNAL - A CHRONOLOGICAL
RECORD OF ALL FINANCIAL TRANSACTIONS
• USES THE DOUBLE ENTRY SYSTEM - FOR
EVERY DEBIT THERE IS A CREDIT
• EVERY TRANSACTION AFFECTS AT LEAST TWO
ACCOUNTS
GENERAL LEDGER
• WHERE SIMILAR TRANSACTIONS ARE
GROUPED INTO T ACCOUNTS
• THESE T ACCOUNTS ARE THEN TOTALED
ADJUSTING ENTRIES
• ADJUSTING ENTRIES TO FIX ERRORS IN THE
GENERAL LEDGER DUE TO:
– PASSAGE OF TIME
– THEFT OF MISPLACEMENT
– JOURNAL ENTRY OMITTED
– JOURNAL ENTRY TO WRONG ACCOUNT
– JOURNAL ENTRY FOR WRONG AMOUNT
FINANCIAL STATEMENTS PREPARED
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INCOME STATEMENT
RETAINED EARNINGS STATEMENT
BALANCE SHEET Statement
CASH FLOW Statement
CLOSING ENTRIES
• ALL REVENUE, EXPENSE, AND DIVIDENDS PAID
ARE CLOSED OUT TO ZERO SO THAT THE NEW
YEAR WILL BEGIN WITH A ZERO BALANCE
START OVER
• THAT’S YOUR JOB