Unit 6 Accounting Cycle
Denise Davidson
AB114-02 / Accounting I
Unit 6 – Writing Assignment
Kaplan University
Prof. Richard Franchetti
March 13, 2012
As many are familiar with the term accounting, not many know what the accounting cycle is comprised of. The term “accounting” itself is defined as “the theory and system of setting up, maintaining, and auditing the books of a business; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc.” So what does this mean and how does it apply to accounting? Well this is where the accounting cycle comes into play. There are ten steps to the accounting cycle. Which …show more content…
A ledger is basically a break down of each account, which is recorded by date, posting reference, debit, credit, and balance with debit and credit as subcategories under the balance again. The transactions that you will post to this ledger comes from the journal entries in step one. It is important to remember that the journal entries are recorded in the order that they were received or disbursed according the journal. Step three, prepare an unadjusted trial balance. An unadjusted trial balance is prepared to determine if any errors occurred in steps one and two. However, it does not provide proof that the ledger is 100% accurate. This simply determines if the debits and credits are equal. If the two balances are not correct then an error has occurred and must be found so that it is corrected. This step is really important because, if the balances are not equal all of the statements will be incorrect. Step four, assemble and analyze adjustment data. This is where the accounts are updated. The accounts that typically need updating are prepaid expenses, unearned revenue, accrued revenue, accrued expenses, and depreciation expense. Over the period of the month these accounts will either have a debit or credit, which is why an adjustment is …show more content…
This is the meat and potatoes of the accounting cycle. Because everything you’ve done in steps one through seven will be recorded on one or more of the financial statements. The financial statements are the income statement, owner’s equity statement and the balance sheet. It is important to prepare the financial statements in this order. The information that you will need for these statements will be contained in the adjusted trial balance, the end-of-period spreadsheet, or the ledger. The statement of owner’s equity will show the net income or net loss which will be reported from the income statement and the owner’s capital will be reported on the balance
AB114-02 / Accounting I
Unit 6 – Writing Assignment
Kaplan University
Prof. Richard Franchetti
March 13, 2012
As many are familiar with the term accounting, not many know what the accounting cycle is comprised of. The term “accounting” itself is defined as “the theory and system of setting up, maintaining, and auditing the books of a business; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc.” So what does this mean and how does it apply to accounting? Well this is where the accounting cycle comes into play. There are ten steps to the accounting cycle. Which …show more content…
A ledger is basically a break down of each account, which is recorded by date, posting reference, debit, credit, and balance with debit and credit as subcategories under the balance again. The transactions that you will post to this ledger comes from the journal entries in step one. It is important to remember that the journal entries are recorded in the order that they were received or disbursed according the journal. Step three, prepare an unadjusted trial balance. An unadjusted trial balance is prepared to determine if any errors occurred in steps one and two. However, it does not provide proof that the ledger is 100% accurate. This simply determines if the debits and credits are equal. If the two balances are not correct then an error has occurred and must be found so that it is corrected. This step is really important because, if the balances are not equal all of the statements will be incorrect. Step four, assemble and analyze adjustment data. This is where the accounts are updated. The accounts that typically need updating are prepaid expenses, unearned revenue, accrued revenue, accrued expenses, and depreciation expense. Over the period of the month these accounts will either have a debit or credit, which is why an adjustment is …show more content…
This is the meat and potatoes of the accounting cycle. Because everything you’ve done in steps one through seven will be recorded on one or more of the financial statements. The financial statements are the income statement, owner’s equity statement and the balance sheet. It is important to prepare the financial statements in this order. The information that you will need for these statements will be contained in the adjusted trial balance, the end-of-period spreadsheet, or the ledger. The statement of owner’s equity will show the net income or net loss which will be reported from the income statement and the owner’s capital will be reported on the balance