Download The accounting cycle includes analysis of transactions, transferring

The accounting cycle includes analysis of transactions, transferring
journal entries into a general ledger, revenue, and expense closed.
LEARNING OBJECTIVE [ edit ]
Outline the accounting cycle from point of transaction to financial statements
KEY POINTS [ edit ]
When a transaction occurs, a document is produced. Most of the time these documents are
external to the business, however, they can also be internal documents, such as inter-office sales.
These documents are referred to as a source document.
The Journal entries are then transferred to a Ledger. The group of accounts is called ledger, or a
book of accounts. The purpose of a Ledger is to bring together all of the transactions for similar
activity.
Financial statements are drawn from the trial balance which may include: the Income statement,
the Balance sheet, and the Cash flow statement.
3. prepare trial balance
4. post adjusting entries
5. prepare adjusted trial balance
6. prepare financial statements
7. post closing entries
8. prepare a post closing trial balance
TERM [ edit ]
Journal entries
A journal entry, in accounting, is a logging of transactions into accounting journal items. The
journal entry can consist of several items, each of which is either a debit or a credit.
Give us feedback on this content: FULL TEXT [edit ]
When a transaction occurs, a document is
produced. Most of the time these
documents are external to the business,
however, they can also be internal
documents, such as inter-office sales.
These documents are referred to as
a source document. Some examples are:
the receipt you get when you purchase
something at the store, interest you earned
Register for FREE to stop seeing ads
on your savings account which is
documented in your monthly bank statement, and the monthly electric utility bill that comes
in the mail. These source documents are then recorded in a Journal. This is also known as a
book of first entry. It records both sides of the transaction recorded by the source document.
These write-ups are known asJournal entries.
These Journal entries are then transferred to a Ledger, which is the group of accounts, also
known as a book of accounts. The purpose of a Ledger is to bring together all of the
transactions for similar activity. For example, if a company has one bank account, then all
transactions that include cash would then be maintained in the Cash Ledger. This process of
transferring thevalues is known as posting. Once the entries have all been posted, the Ledger
accounts are added up in a process calledBalancing.
A particular working document called an unadjusted Trial balance is created. This lists all
the balances from all the accounts in the Ledger. Notice that the values are not posted to the
trial balance, they are merely copied. At this pointaccounting happens. The accountant
produces a number of adjustments which make sure that the values comply with accounting
principles. These values are then passed through the accounting system resulting in
an adjusted Trial balance. This process continues until the accountant is satisfied.
Financial statements are drawn from the trial balance which may include: the Income
statement, the Balance sheet, and theCash flow statement.
Finally, all the revenue and expense accounts are closed.