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Accounting Cycle

Learn the complete accounting cycle process with Mugan-Akman 2005 methodology. Understand adjusting entries, prepare financial statements, and close accounts effectively.

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Accounting Cycle

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  1. Adjust the accounts and prepare trial balance Analyze and record the transactions Post the transactions and prepare trial balance Prepare the financial statements Close the accounts and prepare trial balance Accounting Cycle Mugan-Akman 2005

  2. Matching Principle All revenues must be recorded in the accounting period in which the goods are sold or services are rendered and all expenses must be recorded in the accounting period in which they are incurred to produce such revenues Mugan-Akman 2005

  3. Adjusting Entries • Some journal entries are made at the end of the accounting period just to separate the effect of an event into its proper periods. • Each adjusting entry affects: 1) a revenue or expense account 2) an asset or liability account (except cash) • Examples include: 1. Recognition of accrued revenues and receivables, 2. Interest calculations, 3. Recognition of accrued expenses and payables, 4. Allocation of prepaid operating costs, and 5. Recognition of depreciation. Mugan-Akman 2005

  4. When do we need adjusting entries? Mugan-Akman 2005

  5. TRIAL BALANCE Mugan-Akman 2005

  6. Adjusting Entries Mugan-Akman 2005

  7. Adjustment (1)Prepaid Rent Mugan-Akman 2005

  8. Adjustment (2)Prepaid Insurance Mugan-Akman 2005

  9. Adjustment (3)Office Supplies Mugan-Akman 2005

  10. Adjustment (4)Depreciation of Property Plant & Equipment Mugan-Akman 2005

  11. Express Travel Agency Partial Balance Sheet 31January 2004 In TL Plant and Equipment Office Equipment and Furniture 15.000 Less: Accumulated Depreciation (250) Plant and Equipment, net 14.750 Mugan-Akman 2005

  12. Adjusting Entries Mugan-Akman 2005

  13. Adjustment (5)Unearned Revenues Mugan-Akman 2005

  14. Adjusting Entries Mugan-Akman 2005

  15. January 2004 Mugan-Akman 2005

  16. Adjustment (6)Accrued Salary Expense Mugan-Akman 2005

  17. Adjustment (7)Accrued Interest Expense Mugan-Akman 2005

  18. Adjusting Entries Mugan-Akman 2005

  19. Adjustment (8)Accrued Revenues Mugan-Akman 2005

  20. Effects of Adjusting Entries Mugan-Akman 2005

  21. Mugan-Akman 2005

  22. Adjust the accounts and prepare trial balance Analyze and record the transactions Post the transactions and prepare trial balance Prepare the financial statements Close the accounts and prepare trial balance Accounting Cycle Mugan-Akman 2005

  23. Steps to Close Accounts • Close temporary accounts with credit balances to income summary • Close temporary accounts with debit balances to income summary • Close income summary • Close dividends or owners’ withdrawals Mugan-Akman 2005

  24. Mugan-Akman 2005

  25. Closing Credit Balances Mugan-Akman 2005

  26. Mugan-Akman 2005

  27. Closing Debit Balances Mugan-Akman 2005

  28. Closing Income Summary Mugan-Akman 2005

  29. Closing Withdrawals Mugan-Akman 2005

  30. Mugan-Akman 2005

  31. Adjust the accounts and prepare trial balance Analyze and record the transactions Post the transactions and prepare trial balance Prepare the financial statements Close the accounts and prepare trial balance Accounting Cycle Mugan-Akman 2005

  32. Mugan-Akman 2005

  33. Mugan-Akman 2005

  34. Mugan-Akman 2005

  35. Closing Credit Balances Mugan-Akman 2005

  36. Closing Debit Balances Mugan-Akman 2005

  37. Closing Income Summary Mugan-Akman 2005

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