Slides complete steps 1 3 in the accounting cycle

Complete Steps 1-3 in Accounting Cycle Principles of Cost Analysis and Management © Dale R Geiger 2011 What is the Accounting Cycle? The Accounting Cycle is the systematic process by which accounting information is recorded, compiled, and reported to users © Dale R Geiger 2011 Terminal Learning Objective • • Task: Complete Steps 1-3 In Accounting Cycle (Journalize, Post, Trial Balance) • Standard with at least 80% accuracy:  Condition: You are a cost advisor technician with access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors • • • List steps in the Accounting Cycle Describe terminology (journal, ledger, debit, credit) Record transactions in tabular format under the accrual basis © Dale R Geiger 2011 The Accounting Cycle Record Transactions Post-Closing Trial Post to Ledger Balance Close Accounts Prepare Trial Balance Prepare Statements Adjust Accounts Adjusted Trial Balance © Dale R Geiger 2011 The Accounting Cycle Record Transactions Post-Closing Trial Post to Ledger Balance Close Accounts Prepare Trial Balance Prepare Statements Adjust Accounts Adjusted Trial Balance © Dale R Geiger 2011 The Accounting Cycle Record Transactions Post-Closing Trial Post to Ledger Balance Close Accounts Prepare Trial Balance Prepare Statements Adjust Accounts Adjusted Trial Balance © Dale R Geiger 2011 The Accounting Cycle Record Transactions Post-Closing Trial Post to Ledger Balance Close Accounts Prepare Trial Balance Prepare Statements Adjust Accounts Adjusted Trial Balance © Dale R Geiger 2011 The Accounting Cycle Record Transactions Post-Closing Trial Post to Ledger Balance Close Accounts Prepare Trial Balance Prepare Statements Adjust Accounts Adjusted Trial Balance © Dale R Geiger 2011 The Accounting Cycle Record Transactions Post-Closing Trial Post to Ledger Balance Close Accounts Prepare Trial Balance Prepare Statements Adjust Accounts Adjusted Trial Balance © Dale R Geiger 2011 The Accounting Cycle Record Transactions Post-Closing Trial Post to Ledger Balance Close Accounts Prepare Trial Balance Prepare Statements Adjust Accounts Adjusted Trial Balance © Dale R Geiger 2011 10 Lacy’s Journal Transaction Description Purchased Supplies Cash -65 + Other Assets = + +65 = Liab + + Financial Position + + Rev – Exp – Credit to Cash reflects a decrease in the Cash account © Dale R Geiger 2011 33 The Ledger • • The LEDGER is a Summary of all Transactions By Account We will represent each Ledger Account with a • • • T-Account A debit entry from the Journal is posted on the left side of the T-Account A credit entry from the Journal is posted on the right side of the T-Account The balance of an account is its excess of debits over credits (or vice versa) © Dale R Geiger 2011 34 Lacy’s Ledger Cash (+) Other Assets (-) (-) Revenues Financial Position (-) (+) Liabilities (+) (-) © Dale R Geiger 2011 (-) (+) Expenses (+) (+) (-) 35 Lacy’s Ledger Cash (+) Other Assets (-) 200 Liabilities (+) (-) (-) (+) 20 40 40 - 65 20 40 - 140 Revenues Financial Position (-) (+) (-) © Dale R Geiger 2011 Expenses (+) (+) (-) 36 Lacy’s Ledger Cash (+) Other Assets (-) 200 Liabilities (+) (-) (-) (+) 20 40 40 - 65 20 40 - 140 Revenues Financial Position (-) (+) (-) Expenses (+) (+) (-) 200 © Dale R Geiger 2011 37 Lacy’s Ledger Cash Other Assets Liabilities (+) (-) (+) (-) (-) (+) 200 20 20 40 40 15 10 65 - 5 20 50 65 40 40 140 - 130 Revenues Financial Position (-) (+) Expenses (-) (+) (+) 15 10 20 50 - - 15 200 After all transactions are posted, the Ledger Balances agree with our equation (-) 85 Transaction Description Ending Balance Cash + 130 + Other Assets 140 = Liabilities = © Dale R Geiger 2011 + + Financial Position 200 + + Revenues – 85 - Expenses 38 15 The Trial Balance • Lists all accounts and their balances in two-column format • Proves that Debits equal Credits • • Forces accountant to find errors before preparing statements Provides a starting point for adjustments, statements and closing entries © Dale R Geiger 2011 39 Lacy‘s Trial Balance Account Title dr  Cash  Other Assets cr $130    140    $ -  Liabilities    Financial Position   200   Revenues    85  Expenses  15    $285 $285  Totals Our equation essentially show the same information as the Trial Balance: Transaction Description Ending Balance Cash + 130 + Other Assets 140 = Liabilities = © Dale R Geiger 2011 + + Financial Position 200 + + Revenues – 85 - Expenses 40 15 Check on Learning • • A decrease to Cash is recorded on which side of the Cash account? The summary of transactions by account is called the…? © Dale R Geiger 2011 41 Conclusion • • Debits and credits are used in accounting systems to reflect changes in accounts It’s not necessary to memorize debits and credits to understand the effects of transactions • We will rely on the equation and T-Accounts to illustrate transactions © Dale R Geiger 2011 42 Practical Exercise © Dale R Geiger 2011 43 Accounting Cycle Spreadsheet Journal entries may be entered by hand (this step is optional) © Dale R Geiger 2011 44 Accounting Cycle Spreadsheet Post transactions to T-Accounts Balances calculate automatically 45 © Dale R Geiger 2011 Accounting Cycle Spreadsheet The Trial Balance is generated automatically from the T-Accounts Note that debits = credits © Dale R Geiger 2011 46 Practical Exercise © Dale R Geiger 2011 47 ...What is the Accounting Cycle? The Accounting Cycle is the systematic process by which accounting information is recorded, compiled, and reported to users © Dale R Geiger 2011 Terminal Learning Objective... List steps in the Accounting Cycle Describe terminology (journal, ledger, debit, credit) Record transactions in tabular format under the accrual basis © Dale R Geiger 2011 The Accounting Cycle. .. is the first step in the Accounting Cycle? What is the purpose of the Trial Balance? â Dale R Geiger 2011 12 The Journal Accounting events are recorded in the JOURNAL • • • The Journal is a chronological