©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

The Accounting CycleThe Accounting Cycle

Welcome toWelcome to

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Course ObjectivesCourse Objectives

In this course, you will learn:In this course, you will learn: The eleven-step accounting cycleThe eleven-step accounting cycle How to use recordkeeping How to use recordkeeping

systemssystems Key accounting vocabulary Key accounting vocabulary The differences between cash The differences between cash

and accrual accountingand accrual accounting Accounting decision makingAccounting decision making

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

AgendaAgenda

S2S2

IntroductionIntroduction 20 minutes20 minutes

Module 1: Overview of AccountingModule 1: Overview of Accounting 70 minutes70 minutes

Break Break 10 minutes10 minutes

Module 1: Overview of Accounting (cont’d)Module 1: Overview of Accounting (cont’d) 20 minutes20 minutes

Module 2: Ledger and JournalModule 2: Ledger and Journal 70 minutes70 minutes

Lunch BreakLunch Break 30 minutes30 minutes

Module 3: Adjusting EntriesModule 3: Adjusting Entries 35 minutes35 minutes

Module 4: Closing EntriesModule 4: Closing Entries 45 minutes45 minutes

Module 5: The Balance Sheet and Income Module 5: The Balance Sheet and Income StatementStatement

10 minutes10 minutes

BreakBreak 10 minutes10 minutes

Module 5: The Balance Sheet and Income Module 5: The Balance Sheet and Income Statement (cont’d)Statement (cont’d)

65 minutes65 minutes

ConclusionConclusion 10 minutes10 minutes

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Types of BusinessesTypes of Businesses

S3S3

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Forms of Business Forms of Business OwnershipOwnership

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

The Accounting CycleThe Accounting Cycle

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Steps in the Accounting Steps in the Accounting CycleCycle

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1.1. Business transactions are createdBusiness transactions are created

2.2. Analyze and record transactionsAnalyze and record transactions

3.3. Post information from journal to Post information from journal to ledgerledger

4.4. Prepare trial balancePrepare trial balance

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Steps in the Accounting Steps in the Accounting Cycle (cont’d)Cycle (cont’d)

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5.5. Journalize adjusting entriesJournalize adjusting entries

6.6. Post adjustments from journal Post adjustments from journal to ledgerto ledger

7.7. Prepare adjusted trial balancePrepare adjusted trial balance

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Steps in the Accounting Steps in the Accounting Cycle (cont’d)Cycle (cont’d)

8.8. Journalize closing entriesJournalize closing entries

9.9. Post closing entries from journal Post closing entries from journal to ledgerto ledger

10.10. Prepare post-closing trial balancePrepare post-closing trial balance

11.11. Prepare financial statements Prepare financial statements

S8S8

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Five Basic Categories of Five Basic Categories of RecordkeepingRecordkeeping

S9S9

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Single-Entry Single-Entry RecordkeepingRecordkeeping

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Double-Entry AccountingDouble-Entry Accounting

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Steps in Double-Entry Steps in Double-Entry AccountingAccounting

1.1. Identify key words in a Identify key words in a transactiontransaction

2.2. Identify at least two accounts Identify at least two accounts affectedaffected

3.3. Classify accounts Classify accounts

4.4. Increase or decrease Increase or decrease accountsaccounts

5.5. Record the entryRecord the entry

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Teeter-Totter Double-EntryTeeter-Totter Double-Entry

S13S13

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Debits and CreditsDebits and Credits

S14S14

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

General Rules for General Rules for Adjusting EntriesAdjusting Entries

End of the month or End of the month or accounting periodaccounting period

Cash is never usedCash is never used Expense or revenue account is Expense or revenue account is

usedused– Expenses are normally Expenses are normally

debitsdebits– Revenues are normally Revenues are normally

creditscredits

S15S15

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

The Accounting Cycle: The Accounting Cycle: Adjusting EntriesAdjusting Entries

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Categories for Adjusting Categories for Adjusting EntriesEntries

AssetsAssets LiabilitiesLiabilities Accrued ExpensesAccrued Expenses Accrued RevenueAccrued Revenue

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

The Four Basic Entries to The Four Basic Entries to Closing AccountsClosing Accounts

Close all revenue accounts.Close all revenue accounts. Close all expense accounts.Close all expense accounts. Close the income summary Close the income summary

account and recording NI or NL.account and recording NI or NL. Close the withdrawal account.Close the withdrawal account.

S18S18

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Preparation of the Financial Preparation of the Financial StatementsStatements

S19S19

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

The Income StatementThe Income Statement

S20S20

©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Income Statement Income Statement Comparisons Comparisons

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©NETg, ©NETg, The Accounting Cycle, Revised EditionThe Accounting Cycle, Revised Edition

Inventory Flow MethodsInventory Flow Methods

Specific invoiceSpecific invoice Weighted averageWeighted average First-in, first-outFirst-in, first-out Last-in, first-outLast-in, first-out

S22S22