Lecture - Accounting Cycle

Accounting is a systematic process of measuring and reporting to various users relevant financial information for decisionmaking regarding the economic activity of an organization.

Financial Statements: Income Statement Balance Sheet Statement of Changes in !ners" #$uity Statement of %etained #arnings Statement of Cash Flo!s

Accounting Cycle &ournalize 'ransactions (ost to the )edger  (repare a 'rial Balance (repare Ad*usting #ntries &ournalize and (ost (repare Financial Statements (repare Closing #ntries

%evenues

-

Compensation received for selling a good or providing a service

#+penses

-

Costs incurred in generating revenues Cost of operating a ,usiness alue of an asset lost or used up

Assets

-

(ro,a,le future economic ,enefits o,tained ,y an entity #conomic resources o!ned or controlled ,y the  ,usiness

)ia,ilities

-

(ro,a,le future sacrifices of economic ,enefits

!ners  #$uity - %esidual interest in the assets of an entity =

'ransaction -

An economic e+change ,et!een the ,usiness and an outside party

Account -

A descriptive classification for gathering ,its of economic information

%evie! of the Accounting Cycle )ecture (ro,lem  n cto,er / 0112/ Charlie %a!ls opened the %a!ls %epair Corporation/ !hich specialized in  ,icycle repairs. 'he follo!ing transactions occurred during the first t!o months. ct.

      4

 6ov.

7 0 5  4 4   = ; 5 = 41 41

Began ,usiness ,y making a deposit into a company ,ank account of 30/111 in e+change for /011 shares if stock. (aid the premium on a one-year insurance policy/ 3/011. (aid the current month"s rent/ 3/121. (urchased repair e$uipment from Conklin Company/ 32/211. 'he terms !ere 3511 do!n and 3011 per month for nineteen months. 'he first  payment is due 6ovem,er . (urchased repair supplies from 8c9enna Company on credit/ 341. (aid utility ,ill for cto,er/ 3;2. Cash received from customers for the first half of cto,er/ 3/450. 8ade payment to 8c9enna Company/ 3011. Cash received from customers for the second half of cto,er/ 3/41. se ' accounts for the ledger.@ (repare a trial ,alance for cto,er 4. (repare ad*usting entries for cto,er assuming:

;. 5. =. 7. . 1.

. 0.

ne month"s insurance has e+pired. 'here are 32 of supplies left at month-end. 'he estimated monthly depreciation on store e$uipment is 3=1. 'he estimated income ta+es are 321. (repare an income statement/ statement of retained earnings/ and ,alance sheet for %a!ls Corporation for cto,er/ 0112. (repare closing entries. &ournalize 6ovem,er"s transactions. (ost 6ovem,er"s transactions. (repare a trial ,alance for 6ovem,er 41. (repare ad*usting entries for 6ovem,er assuming: ne month"s insurance has e+pired. 'here are 327 of supplies left at month-end. 'he estimated monthly depreciation on store e$uipment is 3=1. 'he estimated income ta+es are 321. (repare an income statement/ statement of retained earnings/ and ,alance sheet for %a!ls Corporation for 6ovem,er/ 0112. (repare closing entries.