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The Accounting Cycle

The Accounting Cycle. Welcome to. Course Objectives. In this course, you will learn: The eleven-step accounting cycle How to use recordkeeping systems Key accounting vocabulary The differences between cash and accrual accounting Accounting decision making. S1. Agenda. S2.

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The Accounting Cycle

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  1. The Accounting Cycle Welcome to

  2. Course Objectives In this course, you will learn: • The eleven-step accounting cycle • How to use recordkeeping systems • Key accounting vocabulary • The differences between cash and accrual accounting • Accounting decision making S1

  3. Agenda S2

  4. Types of Businesses S3

  5. Forms of Business Ownership S4

  6. The Accounting Cycle S5

  7. Steps in the Accounting Cycle Business transactions are created Analyze and record transactions Post information from journal to ledger Prepare trial balance S6

  8. Steps in the Accounting Cycle (cont’d) • Journalize adjusting entries • Post adjustments from journal to ledger • Prepare adjusted trial balance S7

  9. Steps in the Accounting Cycle (cont’d) • Journalize closing entries • Post closing entries from journal to ledger • Prepare post-closing trial balance • Prepare financial statements S8

  10. Five Basic Categories of Recordkeeping S9

  11. Single-Entry Recordkeeping S10

  12. Double-Entry Accounting S11

  13. Steps in Double-Entry Accounting • Identify key words in a transaction • Identify at least two accounts affected • Classify accounts • Increase or decrease accounts • Record the entry S12

  14. Teeter-Totter Double-Entry S13

  15. Debits and Credits S14

  16. General Rules for Adjusting Entries • End of the month or accounting period • Cash is never used • Expense or revenue account is used • Expenses are normally debits • Revenues are normally credits S15

  17. The Accounting Cycle: Adjusting Entries S16

  18. Categories for Adjusting Entries • Assets • Liabilities • Accrued Expenses • Accrued Revenue S17

  19. The Four Basic Entries to Closing Accounts • Close all revenue accounts. • Close all expense accounts. • Close the income summary account and recording NI or NL. • Close the withdrawal account. S18

  20. Preparation of the Financial Statements S19

  21. The Income Statement S20

  22. Income Statement Comparisons S21

  23. Inventory Flow Methods • Specific invoice • Weighted average • First-in, first-out • Last-in, first-out S22

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