Accounting Completing and Closing the Accounting Cycle

closing the accounting cycle

Completing the Accounting Cycle

 

  1. Start with beginning account balances
  2. Journalize transactions as they occur
  3. Post to the accounts (T account)
  4. Compute the unadjusted balance in each account (sum of balance of accounts)
  5. Enter trial balance on worksheet. Journalize and post adjusting entries
  6. Prepare financial statements (income statement, retained earnings, balance sheet)
    1. Income statement- revenues minus expenses
    2. Retained earnings- Net income – dividends
    3. Balance sheet- Assets = liabilities + equity
    4. Journalize and post closing entries
    5. Prepare post-closing trial balance

 

 

closing the accounting cycle

closing the accounting cycle

 

During the accounting period:

  • Journalizing transactions and posting to accounts

End of accounting period

  • Adjusting accounts, preparing financial statements, closing accounts

 

Journalize transactions

Debit

Credit

Summary

 

Ledger

T charts with balances

 

End of accounting period

 

Trial Balance

Debits and credits add up

 

Adjusting Entries

Journalize and post to Ledger Adjusting Transactions

 

Adjusted Trial Balance

 

Includes columns for adjusting debits and credits

 

Financial Statements

 

Closing Entries

Transfer balances from temporary accounts and revenues from income statement to equity

 

Post closing Trial Balance

 

 

 

Worksheet- document with several columns

 

P200

 

Column 1: Accounts

Column 2: Trial Balance and credit and debit balance at bottom

Column 3: Adjustments and total balance at bottom

Column 4: Adjusted Trial Balance with new total credit and debit balance at bottom

Column 5: Income Statement

  • Revenues and expenses
  • Net income + in debit, Net Income – in credit

Column 6: Balance sheet

Net income  + in credit, Net Income – in debit

 

 

 

 

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