the accounting cycle reporting financial results n.
Download
Skip this Video
Download Presentation
The Accounting Cycle Reporting Financial Results

Loading in 2 Seconds...

play fullscreen
1 / 28

The Accounting Cycle Reporting Financial Results - PowerPoint PPT Presentation


  • 167 Views
  • Uploaded on

The Accounting Cycle Reporting Financial Results. Chapter 5. THE ACCOUNTING CYCLE. Process by which accountants prepare financial statements for an entity for a specific period of time. Accounting Cycle. Review – Accounting Cycle. Analyze transactions.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'The Accounting Cycle Reporting Financial Results' - drake-vincent


Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
the accounting cycle
THE ACCOUNTING CYCLE

Process by which accountants prepare financial statements for an entity for a specific period of time

review accounting cycle
Review – Accounting Cycle
  • Analyze transactions.
  • Prepare general journal entries, and post to general ledger.
  • Prepare unadjusted trial balance.
  • Prepare adjusting journal entries, and post to general ledger.
  • Prepare adjusted trial balance.
  • Prepare financial statements.
  • Prepare closing journal entries, and post to general ledger.
  • Prepare post-closing trial balance.
a preparing financial statements
A) Preparing Financial Statements

Publicly owned companies – those with shares listed on a stock exchange – have obligations to release annual and quarterly information to their stockholders and to the public.

The annual report includes comparative financial statements and other information relating to the company’s financial position, business operations, and future prospects.

The financial statements contained in the annual report must be audited by a firm of certified public accountants (CPAs).

1 the income statement
1) The Income Statement

Net income also appears on the Statement of Retained Earnings.

2 the statement of retained earnings

Business Earnings

Dividends

Business Losses

2) The Statement of Retained Earnings

Summarizes the increases and decreases in Retained Earnings during the period.

the statement of retained earnings
The Statement of Retained Earnings

Now, let’s prepare the Balance Sheet.

drafting the notes that accompany financial statements
Drafting the Notes that Accompany Financial Statements
  • Examples of Items Disclosed
  • Lawsuits pending
  • Scheduled plant closings
  • Governmental investigations
  • Significant events occurring

after the balance sheet date

  • Specific customers that

account for a large portion of

revenue

  • Unusual transactions and

related party transactions

Notes to the

Financial Statements

b closing the temporary accounts
B) Closing the Temporary Accounts

The closing process gets the temporary accounts ready for the next accounting period.

1.Close Revenue accounts to Income Summary.

2.Close Expense accounts to Income Summary.

3.Close Income Summary account to Retained Earnings.

4.Close Dividends to Retained Earnings.

closing entries for revenue accounts
Closing Entries for Revenue Accounts

Since Sales Revenue has a credit balance, the closing entry requires a debit to the Sales Revenue account.

closing entries for expense accounts
Closing Entries for Expense Accounts

Since expense accounts have a debit balance, the closing entry requires a credit to the expense accounts.

closing the income summary account
Closing the Income Summary Account

Since Income Summary has a $400 credit balance, the closing entry requires a debit to Income Summary.

closing the dividends account
Closing the Dividends Account

Since the Dividends account has a debit balance, the closing entry requires a credit to the Dividends account.

c after closing trial balance
C) AFTER-CLOSING TRIAL BALANCE
  • The final Trial Balance after closing will display only permanent, balance sheet accounts.
  • The Retained Earnings in this Trial Balance is the ENDING retained earnings for the period and includes the effects of all the revenues, expenses, and dividends for the period.
after closing trial balance
After-Closing Trial Balance
  • List of permanent accounts and their balances after posting closing entries
  • Total debits and credits must be equal
e valuating the business

Evaluating Profitability

Evaluating Liquidity

Net Income Percentage

Net IncomeTotal Revenue

Working Capital

Current Assets – Current Liabilities

=

=

Return on Equity

Net IncomeAvg. Stockholders’Equity

=

CurrentRatio

Current AssetsCurrent Liabilities

=

EVALUATING THE BUSINESS
preparing financial statements covering different periods of time
Preparing Financial Statements Covering Different Periods of Time

Many companies prepare financial statements at various points throughout the year.

Annually

Quarterly

Interim Financial Statements

Monthly

Dec. 31

Jan. 1