1. ACCOUNTING
CYCLE

2. Definition:
Process by which accountants prepare
financial statements for an entity for a
specific period of time

4. 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

5. 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

6. GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT
Oct 8 Salary Expense 1000
Salary Payable 1000
8 Supplies Expense 500
Expense 500

7. 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

8. Financial Statements
Income Statement
Statement of retained earnings
Balance Sheet
Cash Flow Statement

9. 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?

10. 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

11. After‐Closing Trial Balance
Reflects all accounts with balances after the closing
process
Assets
Liabilities
Equity
TOTAL DEBITS MUST EQUAL TOTAL CREDITS