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Completing the Accounting Cycle – Part II

Learn about the accounting cycle, including analyzing and journalizing transactions, preparing financial statements, and closing entries. Understand the fiscal year and natural business year concepts.

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Completing the Accounting Cycle – Part II

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  1. Chapter 4 Completing the Accounting Cycle – Part II

  2. Objective 1 Describe the accounting cycle.

  3. The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period’s transactions is called the accounting cycle. There are ten steps in the accounting cycle.

  4. Accounting Cycle • Transactions are analyzed and recorded in the journal. • Transactions are posted to the ledger. • An unadjusted trial balance is prepared. • Adjustment data are assembled and analyzed. • An optional end-of-period spreadsheet (work sheet) is prepared. (continued)

  5. Accounting Cycle (continued) • Adjusting entries are journalized and posted to the ledger. • An adjusted trial balance is prepared. • Financial statements are prepared. • Closing entries are journalized and posted to the ledger. • A post-closing trial balance is prepared.

  6. Example Exercise 4-6 Accounting Cycle From the following list of steps in the accounting cycle, identify what two steps are missing. • Transactions are analyzed and recorded in the journal. • Transactions are posted to the ledger. • Adjustment data are assembled and analyzed. • An optional end-of-period spreadsheet (work sheet) is prepared. • Adjusting entries are journalized and posted to the ledger. • Financial statements are prepared. • Closing entries are journalized and posted to the ledger. • A post-closing trial balance is prepared.

  7. Example Exercise 4-6 (continued) The following two steps are missing: (1) the preparation of an unadjusted trial balance and (2) the preparation of the adjusted trial balance. The unadjusted trial balance should be prepared after step (b). The adjusted trial balance should be prepared after step (e).

  8. Objective 2 Illustrate the accounting cycle for one period.

  9. Exhibit 9 Journal entries for April, Kelly Consulting

  10. Exhibit 9 Journal entries for April, Kelly Consulting (continued)

  11. Exhibit 10 Unadjusted Trial Balance, Kelly Consulting

  12. Exhibit 11 End-of-Period Spreadsheet (Work Sheet) 4-63

  13. Exhibit 12 Adjusting Entries, Kelly Consulting

  14. Exhibit 13

  15. Exhibit 14 Financial Statements, Kelly Consulting

  16. Exhibit 14 Financial Statements, Kelly Consulting (continued)

  17. Exhibit 14 Financial Statements, Kelly Consulting (continued)

  18. Exhibit 15 Closing Entries, Kelly Consulting

  19. Exhibit 15 Closing Entries, Kelly Consulting

  20. Exhibit 17 Ledger, Kelly Consulting

  21. Exhibit 17 Ledger, Kelly Consulting (continued)

  22. Exhibit 17 Ledger, Kelly Consulting (continued)

  23. Exhibit 17 Ledger, Kelly Consulting (continued)

  24. Objective 3 Explain what is meant by the fiscal year and the natural business year.

  25. The annual accounting period adopted by a business is known as its fiscal year.When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the natural year.

  26. Financial History of a Business

  27. THE END

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