Lesson 5

• Accounting Cycle - Series of steps accountants perform during an accounting period relating to analyzing, recording, classifying, summarizing and reporting useful information. Its purpose is to generate the financial statements
• Fill in the Blanks

  A) Analyzing business transactions

  B) Journalizing

  C) Posting

  D) Preperation of trial balance

  E) Data for adjusting entries

  F) Preparing a worksheet

  G) Preparation of financial statements

  H) Journalizing & posting adjusting entries

  I) Journalizing & posting of closing entries

  J) Post-closing trial balance preparation

  K) Journalizing & posting of reversing entries

  L) Recording

  M) Classifying

  N) Summarizing

  O) Beg. of nxt acctng period

  
• Worksheet - columnar sheet of paper used to summarize information needed to make the adjusting and closing entries and to prepare the financial statements. It is only a tool used by accountants and is not part of the formal accounting record. 
• What is in the picture?

  A) Worksheet

  
• What is in the picture?

  A) Statement of Income

  B) Income statement

  
• What is in the picture?

  A) Capital Statement

  B) Capital Statement

  
• What is in the picture?

  A) Balance Sheet or Statement of Financial Position

  
• What is in the picture?

  A) Statement of Cash Flows

  
• Classified Statement of Financial Position - subdivides the assets and liabilities in order to provide more specific information for the users of financial statements. The assets and liabilities are classified into current and non-current.
• Current Assets

  • Cash and other assets that are converted to cash or used up in a relatively short period of time, usually 1 yr or less.
  • Listed in the order of liquidity (convertibility into cash).
• Non-current Asset

  • Acquire for use in the business rather than for sale and is used for long-term purposes.
• Current Liabilities

  • Debts usually due within one year, the payment of which normally will require the use of current assets.
  • Listed in the order of maturity (due date)
• Non-current Liabilities

  • Debts will be paid after a relatively long period of time, usually more than a year.
• Types of Liabilities:

  • Current Liabilities
  • Non-current Liabilities
• Types of Assets:

  • Current Asset
  • Non-current Asset
• What is the picture?

  A) Journal - Adjusting Entries

  
• What is in the picture?

  A) With Reversing Entry

  B) Without Reversing Entry

  
• What is in the picture?

  A) Journal - Closing Entry

  
• Closing Process - entries prepared at the end of the accounting period to bring the balances of the temporary or nominal accounts (revenues, expense and drawing accounts) to zero, so they will be ready to  receive data for the next accounting period.
• A clearing account called "Income Summary" (also called Revenue and Expense Summary or Profit and Loss Summary)is used.
• What is in the picture?

  A) Post-Closing Trial Balance

  B) Post-Closing Trial Balance

  
• Interim Statements - financial statements prepared for a period of less than a year.
• What is in the picture?

  A) For Reverse

  B) For Reverse

  C) For Reverse - Expense method only

  D) For Reverse - Revenue method only

  E) Not Reversed

  F) Not Reversed