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Q: What are the steps in completing the accounting cycle? How do the different steps affect the financial statements? What is the effect on the financial statements of missing a step when completing the
accounting cycle?
A: steps in the accounting cycle: 1. Identify the transaction and find locate its source document. 2. Record the transaction in the general journal and related journals. 3. Post transactions to the ledger accounts. 4. Prepare the trial balance. 5. [ Make sure the trial balance totals are equal. 6. Prepare any adjusting entries in the trial balance. 7. Create an adjusted trial balance. 8.
Create your financial statements. 9. Prepare the closing journal. 10. Post to the general ledger. 11. Create the after-closing trial balance. Accounting Cycle If you comb through a company?s accounting cycle, you see the tools, tactics and strategies the business deploys to record economic events, review them for data accuracy and completeness and ensure regulatory conformity. The last item means taking tangible steps to evaluate a transaction, determine how to record and report it and find the accounting rule that applies under the circumstances. This distinctive approach is important because a financial institution - such as a bank - doesn?t record inventory the way a manufacturing firm does, for example. Financial Statements In the modern economy, companies often evolve in a competitive culture obsessed with measuring leadership on fronts as diverse as solvency, profitability, liquidity and fundraising prowess. To evaluate this quartet of indicators, the respective data summaries are a statement of financial position, a statement of profit and loss, a statement of cash flows and a statement of changes in shareholders? equity. A solvent company has a positive net worth - meaning more assets than debts. ?Profitable? is a term finance people ascribe to a business with more revenues than expenses. To learn more about a company?s liquidity, delve into its statement of cash flows and heed things like operating, investing and financing activities. ]
Shey091808|Points 636|
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Asked 10/25/2012 8:54:51 AM
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