* Accounting Cycle

• Accounting cycle is a sequence of accounting procedure which is used to record, classify and summarize the business transactions.

*Accounting Cycle

Source document Recording in journal Posting in ledger Trial balance Financial statement

Agenda…

• A source document refers to includes any document that is received and issued against any business transactions, which is needed to be recorded in a journal.

*Source document

• The first step of accounting cycle is recording transactions in the journal. The any type of business transactions occurred are entered in the journal.

*Recording transactions in journal

• After recording the transactions in journal the debit and credit entries in account balances are posted from journal to ledger.

*Post to ledger accounts

• A trial balance proves and authenticates the equality of debit and credit entries in the ledger.

*Preparing trial balance

Final accounts or financial statements can be divided in two parts:-

1. Trading and profit & loss account

2. Balance sheet

*Preparation of financial statement

• Trading account based on direct income and expenses.

• A trading account represents either gross profit or gross loss.

*Trading Account

• Profit & loss account based on indirect income and expenses.

• A profit & loss account represents either net profit and net loss.

*Profit & loss account

• Balance sheet is a combination of assets and liabilities.

• A balance sheet represents the financial statement of accounts.

*Balance sheet