completing the accounting cycle
DESCRIPTION
4. Completing the Accounting Cycle. Student Version. 1. Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements. 4-2. 1. Exhibit 1. End-of-Period Spreadsheet (Work Sheet). 2. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/1.jpg)
1
Accounting Using Excel for Success
PowerPoint Presentation by:PowerPoint Presentation by:Douglas Cloud, Professor Emeritus Accounting, Pepperdine UniversityDouglas Cloud, Professor Emeritus Accounting, Pepperdine University
© 2011 Cengage Learning. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, All Rights Reserved. May not be copied, scanned,
or duplicated, in whole or in part, except for use as or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain permitted in a license distributed with a certain product or service or otherwise on a password-product or service or otherwise on a password-
protected website for classroom use.protected website for classroom use.
4
Completing the Accounting Cycle
Student Version
![Page 2: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/2.jpg)
21-24-2
1
4-2
Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.
![Page 3: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/3.jpg)
31-34-3
1End-of-Period Spreadsheet (Work Sheet)Exhibit 1
![Page 4: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/4.jpg)
41-44-4
Prepare financial statements from adjusted account balances.
2
4-4
![Page 5: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/5.jpg)
51-54-5 to statement of owner’s equity
2Financial Statements Prepared from Work SheetExhibit 2
![Page 6: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/6.jpg)
61-64-6
from the income statement
to the balance sheet
2Financial Statements Prepared from Work Sheet (continued)Exhibit 2
![Page 7: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/7.jpg)
71-74-7
A classified balance sheet is a balance sheet that was expanded by adding subsections for current assets; property, plant, and equipment; and current liabilities.
2
![Page 8: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/8.jpg)
81-84-8
• Cash and other assets that are expected to be converted into cash, sold or used up usually within a year or less, through the normal operations of the business, are called current assets.
2
• Property, plant, and equipment (also called fixed assets) include assets that depreciate over a period of time. Land is an exception as it is not subject to depreciation.
(continued)
![Page 9: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/9.jpg)
91-94-9
• Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities.
2
• Liabilities not due for a long time (usually more than one year) are long-term liabilities.
• Owner’s equity is the owner’s right to the assets of the business.
![Page 10: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/10.jpg)
101-104-10
from the statement of owner’s equity
2Financial Statements Prepared from Work Sheet (continued)Exhibit 2
![Page 11: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/11.jpg)
111-114-11
Prepare closing entries.
3
4-11
![Page 12: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/12.jpg)
121-124-12
Accounts that are relatively permanent from year to year are called real accounts. Accounts that report amounts for only one period are called temporary accounts or nominal accounts.
3
Closing Entries
![Page 13: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/13.jpg)
131-134-13
Debit each revenue account for the amount of its balance, and credit Income Summary for the total revenue.
Fees Earned
Bal. 16,840
Rent Revenue
Bal. 120
Income Summary 16,840
120
16,960
3Flowchart of Closing Entries for NetSolutions Exhibit 4
![Page 14: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/14.jpg)
141-144-14
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance ExpenseBal. 200
Miscellaneous ExpenseBal. 455
Income Summary
Debit Income Summary for the total expenses and
credit each expense account for its balance.
16,960
Bal. 4,525
Bal. 1,600
Bal. 50
Bal. 985
Bal. 2,040
9,855
455
200
2,040
985
50
1,600
4,525
3Flowchart of Closing Entries for NetSolutions (continued)Exhibit 4
![Page 15: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/15.jpg)
151-154-15
Chris Clark, Capital
Bal. 25,000
Chris Clark, Drawing
Bal. 4,000
Income Summary
16,9609,8557,105
7,105
Debit Income Summary for the
amount of its balance (in this case, the net
income) and credit the capital account.
3Flowchart of Closing Entries for NetSolutions (continued) Exhibit 4
![Page 16: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/16.jpg)
161-164-16
Chris Clark, Capital
Bal. 25,0007,105
Chris Clark, Drawing
Bal. 4,000 4,000
4,000 Debit the capital account for the balance
of the drawing account, and credit
drawing for the same amount.
3Flowchart of Closing Entries for NetSolutions (continued) Exhibit 4
![Page 17: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/17.jpg)
171-174-17
3Closing Entries for NetSolutions
Step 2
Step 3
Step 1
Step 4
Exhibit 5
![Page 18: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/18.jpg)
181-184-18
After the closing entries are posted, all of the temporary accounts have zero balances.
3
![Page 19: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/19.jpg)
191-194-19
A post-closing trial balance is prepared after the closing entries have been posted. The purpose of the PCTB is to verify that the ledger is in balance at the beginning of the next period.
3
![Page 20: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/20.jpg)
201-204-20
3Post-Closing Trial BalanceExhibit 7
![Page 21: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/21.jpg)
211-214-21
Describe the accounting cycle.
4
4-21
![Page 22: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/22.jpg)
221-224-22
The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period’s transactions is called the accounting cycle. There are ten steps in the accounting cycle.
4
![Page 23: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/23.jpg)
231-234-23
2. Transactions are posted to the ledger.3. An unadjusted trial balance is prepared.4. Adjustment data are assembled and
analyzed.5. An optional end-of-period spreadsheet
(work sheet) is prepared.
1. Transactions are analyzed and recorded in the journal.
(continued)
Accounting Cycle4
![Page 24: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/24.jpg)
241-244-24
7. An adjusted trial balance is prepared.8. Financial statements are prepared.9. Closing entries are journalized and
posted to the ledger.10. A post-closing trial balance is prepared.
6. Adjusting entries are journalized and posted to the ledger.
Accounting Cycle (continued)4
![Page 25: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/25.jpg)
251-254-25
5
Illustrate the accounting cycle for one period.
4-25
![Page 26: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/26.jpg)
261-264-26
5
Journal entries for April, Kelly Consulting
Exhibit 9
![Page 27: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/27.jpg)
271-274-27
5
Journal entries for April, Kelly Consulting (continued)
Exhibit 9
![Page 28: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/28.jpg)
281-284-28
5Unadjusted Trial Balance, Kelly ConsultingExhibit 10
![Page 29: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/29.jpg)
291-294-29
5End-of-Period Spreadsheet (Work Sheet)Exhibit 11
4-29
![Page 30: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/30.jpg)
301-304-30
5
Adjusting Entries, Kelly Consulting
Exhibit 12
![Page 31: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/31.jpg)
311-314-31
5Adjusted Trial Balance, Kelly ConsultingExhibit 13
![Page 32: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/32.jpg)
321-324-32
5
Financial Statements, Kelly ConsultingExhibit 14
![Page 33: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/33.jpg)
331-334-33
5Financial Statements, Kelly Consulting (continued)Exhibit 14
![Page 34: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/34.jpg)
341-344-34
Financial Statements, Kelly Consulting (continued)Exhibit 14
5
![Page 35: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/35.jpg)
351-354-35
5
Closing Entries, Kelly ConsultingExhibit 15
![Page 36: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/36.jpg)
361-364-36
5Post-Closing Trial Balance, Kelly ConsultingExhibit 16
![Page 37: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/37.jpg)
371-374-37
6
Explain what is meant by the fiscal year and the natural business year.
4-37
![Page 38: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/38.jpg)
381-384-38
The annual accounting period adopted by a business is known as its fiscal year. When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the natural year.
6
![Page 39: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/39.jpg)
391-394-39
Financial History of a Business
6
![Page 40: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/40.jpg)
401-404-40
5Ledger, Kelly ConsultingExhibit 17
![Page 41: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/41.jpg)
411-414-41
5Ledger, Kelly Consulting (continued)Exhibit 17
![Page 42: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/42.jpg)
421-424-42
5Ledger, Kelly Consulting (continued)Exhibit 17
![Page 43: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/43.jpg)
431-434-43
5Ledger, Kelly Consulting (continued)Exhibit 17
![Page 44: Completing the Accounting Cycle](https://reader036.vdocuments.us/reader036/viewer/2022081520/56813998550346895da130a1/html5/thumbnails/44.jpg)
441-444-44