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THE ACCOUNTING CYCLE

THE ACCOUNTING CYCLE. FINANCIAL TRANSACTION OCCURS RECORD TRANSACTIONS IN GENERAL JOURNAL POST TO THE GENERAL LEDGER RECORD ADJUSTING ENTRIES IN GENERAL JOURNAL PREPARE FINANCIAL STATEMENTS RECORD CLOSING ENTRIES IN GENERAL JOURNAL START OVER. FINANCIAL TRANSACTION OCCURS.

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THE ACCOUNTING CYCLE

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  1. THE ACCOUNTING CYCLE • FINANCIAL TRANSACTION OCCURS • RECORD TRANSACTIONS IN GENERAL JOURNAL • POST TO THE GENERAL LEDGER • RECORD ADJUSTING ENTRIES IN GENERAL JOURNAL • PREPARE FINANCIAL STATEMENTS • RECORD CLOSING ENTRIES IN GENERAL JOURNAL • START OVER

  2. FINANCIAL TRANSACTION OCCURS • BUYING OR SELLING SOMETHING FROM AN EXTERNAL PARTY • BORROWING OR PAYING OFF DEBT • OWNERS PUTTING IN OR TAKING OUT MONEY

  3. RECORD TRANSACTION IN GENERAL JOURNAL • GENERAL JOURNAL - A CHRONOLOGICAL RECORD OF ALL FINANCIAL TRANSACTIONS • USES THE DOUBLE ENTRY SYSTEM - FOR EVERY DEBIT THERE IS A CREDIT • EVERY TRANSACTION AFFECTS AT LEAST TWO ACCOUNTS

  4. GENERAL LEDGER • WHERE SIMILAR TRANSACTIONS ARE GROUPED INTO T ACCOUNTS • THESE T ACCOUNTS ARE THEN TOTALED

  5. ADJUSTING ENTRIES • ADJUSTING ENTRIES TO FIX ERRORS IN THE GENERAL LEDGER DUE TO: • PASSAGE OF TIME • THEFT OF MISPLACEMENT • JOURNAL ENTRY OMITTED • JOURNAL ENTRY TO WRONG ACCOUNT • JOURNAL ENTRY FOR WRONG AMOUNT

  6. FINANCIAL STATEMENTS PREPARED • INCOME STATEMENT • RETAINED EARNINGS STATEMENT • BALANCE SHEET Statement • CASH FLOW Statement

  7. CLOSING ENTRIES • ALL REVENUE, EXPENSE, AND DIVIDENDS PAID ARE CLOSED OUT TO ZERO SO THAT THE NEW YEAR WILL BEGIN WITH A ZERO BALANCE

  8. START OVER • THAT’S YOUR JOB

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