Question

List the steps of the Accounting Cycle. Identify the effects of various business transactions. Compare internal accounting methods.

Please answer the following questions with supporting examples and full explanations. For each of the learning objectives, provide an analysis of how the course supported each objective. Explain how the material learned in this course, based upon the objectives, will be applicable to the professional application.

Answer 1

Accounting cycle is often called as Accounting Process.This includes the following

1) Identifying and analyzing the transactions : Not every transaction is entered in the accounting system but only those transactions that pertain to business entity are entered.

For example loan (personal) taken by owner of the business is not having any nexus with business and accordingly need not be entered.

2) Recording in Journal : Transactions are recorded in a book called journal using double entry book keeping system. Special journals are often used by the business entity to simply and to record recurring transactions like sales, purchases, cash receipts etc.,

3) Posting to Ledger : The third step is to post all those journal entries into a ledger accounts.After posting, balances of each account can be determined.

4) Unadjusted Trail Balance : It prepared to test the equality of debits and credits.

5) Adjusting Entries : These are prepared on the accrual basis of accounting.

6) Adjusted Trail Balance : It is prepared after adjusting entries are made and before the financial statements are prepared.

7) Financial Statements : These are the end-products of accounting system.

8) Closing Entries : Income statement accounts are closed to prepare the system for the next accounting period.