Accounting

• Accountants use the accounting cycle to record transactions, prepare financial statements, and close accounts at the end of an accounting period.
• The accounting equation is the foundation of financial statements, showing how assets are financed by liabilities or equity.
• Financial statements include the balance sheet, income statement, cash flow statement, and statement of changes in equity.
• The accounting cycle consists of five steps: journalizing, posting, closing, preparing adjusting entries, and preparing financial statements.
• Balance sheets show the financial position of a company as of a specific date, while income statements report revenues, expenses, gains, losses, and net income over a specified time period.
• Cash flow statements summarize inflows and outflows of cash during a given period.
• The balance sheet shows the company's assets, liabilities, and owner's equity as of a specific date.
• Journalizing involves recording transactions in journals such as the general journal or subsidiary ledgers.
• Journalizing involves recording daily business activities in journals such as general journal, sales journal, purchase journal, receipts and payments journal, and petty cash journal.
• The income statement reports revenues, expenses, gains, losses, net income, and retained earnings over a specified time period.
• Posting is transferring information from journals to ledger accounts.
• Statement of Changes in Equity shows changes in shareholders' equity due to capital contributions, dividends, retained earnings, and other adjustments.
• Owner's Equity represents the residual interest in the assets of an entity after deducting all its liabilities.
• Closing involves reversing temporary accounts at the end of an accounting period and transferring balances to retained earnings.
• Statement of Changes in Equity shows changes in shareholders' equity due to capital contributions, dividends, retained earnings, and other comprehensive income.
• Posting involves transferring information from journals to ledger accounts using T-accounts.
• Preparing adjusting entries involves making necessary adjustments to reflect accrual-based accounting principles.
• Posting involves transferring information from journals to ledger accounts using debit and credit columns.