the accounting cycle in brief
TRANSCRIPT
![Page 1: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/1.jpg)
ACCOUNTING MANAGEMENT
Submitted To:
Asst.Prof Smruti Ranjan Sahoo
MECHANICAL(B)
![Page 2: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/2.jpg)
ACCOUNTING CYCLEPresented By:-140301MER107: Sambit Raj140301MER108: Rohit Mohanta140301MER109: Sarthak Tapas Ray140301MER110: Soumya Ranjan Rout140301MER111: P Sunjeet Kumar
![Page 3: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/3.jpg)
The Accounting Cycle
• Accounting procedures are performed over a period of time.
• Procedures are performed in a definite order in the accounting cycle.
• The accounting period is a period of time covered by the income statement.
• Usually this is a twelve month period.• The accounting cycle has sequential steps to
be performed again each year.
![Page 4: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/4.jpg)
The Accounting Cycle
• Accounting is the process that...– analyzes, – records,– classifies,– summarizes,– reports, and...– interprets.
![Page 5: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/5.jpg)
The Accounting Cycle
A sole proprietorship:– has one owner– begins with a monthly accounting cycle– owner has a capital and withdrawals account
![Page 6: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/6.jpg)
Business Organizations
• All three types of business entities use the same basic accounting system.
Sole proprietorship
Partnerships
Corporations
![Page 7: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/7.jpg)
• The Accounting Cycle:1 Analyzing2 Recording transactions – journalizing3 Posting to the ledger accounts4 Preparing the trial balance• The accounting cycle has some variations in a
computerized accounting system.
![Page 8: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/8.jpg)
What is the general journal? • It is the book of original entry.• Transactions are written in a journal in
chronological order.• The format of the journal is important.• Journalizing is the process of entering
information as debits and credits to the correct accounts.
![Page 9: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/9.jpg)
What is the general ledger?• It is the book of final entry.• The information from the journal is
transferred to the ledger in the posting process.
• Debits and credits in the journal remain exactly the same when posted to the accounts in the ledger.
![Page 10: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/10.jpg)
What is the chart of accounts?• It is the list of accounts used by a business.• Each business entity has its unique chart of
accounts.• Every chart of accounts has the same
numbered account categories:– Assets, Liabilities, Owner’s Equity– Revenues, Expenses
![Page 11: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/11.jpg)
Journalizing• Debits are always recorded first.• Indent, then record the credit below the
debit.• A short explanation is included on the second
line.• Leave a space between journal entries.
![Page 12: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/12.jpg)
• Debits must always equal credits.• Amounts incurred for items that benefit
future accounting periods are recorded as assets.
• What are some examples?– prepaid rent– prepaid insurance
![Page 13: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/13.jpg)
• Amounts for items used (expenses incurred) in the current accounting period are recorded as expenses.
• What are some examples?– supplies used– rent for the month– expired insurance
![Page 14: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/14.jpg)
• Amounts are recorded as revenue on the date in which they are earned.
• When are revenues earned?• When services are performed, not necessarily
when cash is paid.
![Page 15: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/15.jpg)
Posting• All transactions are recorded in the journal,
then amounts are copied to the ledger accounts named on the journal line.
• Once the amounts are entered into the accounts, a posting reference (PR) must be entered in the journal.
• New balances are computed in the running ledger accounts.
![Page 16: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/16.jpg)
Posting
BalanceAccount: Cash Account: 1000
Insert the number of the journal page.
Date ref. debit credit debit credit
June 1 jr1 5,000 5,000
![Page 17: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/17.jpg)
Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Initial investment
June 1 Cash 1000 5,000 Clara J. Capital 3010 5,000
![Page 18: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/18.jpg)
Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Paid phone bill
July 3 Phone Expense 5040 155 Accounts Payable 2000 155
![Page 19: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/19.jpg)
Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Paid insurance bill
July 6 Insurance Expense 5060 150 Cash 1000 150
![Page 20: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/20.jpg)
Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Paid Accounts Payable
July 8 Accounts Payable 2000 200 Cash 1000 200
![Page 21: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/21.jpg)
Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Performed Services
July 8 Accounts Receivable 1020 850 Service Revenue 4000 850
![Page 22: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/22.jpg)
Preparing the Trial Balance• The trial balance lists the accounts that have
balances in the same order as they appear in the chart of accounts.
• The trial balance will show if debits/credits have been interchanged, or if amounts have been transposed, or if a debit/credit was omitted or recorded twice.
![Page 23: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/23.jpg)
• Some errors do not show, such as omissions or recording to the wrong account.
• Corrections before posting are made in the journal.
• An audit trail must be left.• Do not erase – cross out errors and enter
corrections.
![Page 24: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/24.jpg)
• What about corrections after posting?• This means that errors are also in the ledger
accounts.• Cross out incorrect amounts, change to
corrected amounts, and record balance changes.
![Page 25: THE ACCOUNTING CYCLE IN BRIEF](https://reader035.vdocuments.us/reader035/viewer/2022062523/58eeeaca1a28aba67e8b45a7/html5/thumbnails/25.jpg)
THANK YOU