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Accounting Cycle Assignment
In any business, the accounting cycle assignment is a set of standard steps that are followed in order to record and organize the financial information of the company. The accounting cycle for businesses generally includes these steps: collecting financial data, recording transactions, adjusting entries, preparing financial statements, and closing the books. The cycle then begins anew in the next accounting period. For businesses, it is important to follow the accounting cycle in order to maintain accurate financial records.
What Is The Accounting Cycle Assignment And How To Ace It
The accounting cycle assignment might seem confusing at first, but it’s actually very straightforward. Don’t worry—we’ve got you covered with the step-by-step guide to the accounting cycle below and great advice on how to ace this assignment!
Defining The Accounting Cycle
The Accounting Cycle Assignment is a four-part accounting cycle that teaches students how to perform all the basic accounting functions: journalizing, posting, analyzing and summarizing. The first step of the assignment is journalizing, which is when you log transactions in your journal. You then post these entries in your ledger or table of accounts. The next step in the Accounting Cycle Assignment process is analyzing, when you look at all of your posted transactions for a specific period. Finally, you summarize this data into financial statements such as income statements or balance sheets.
The Steps Of The Accounting Cycle
- The first step of the accounting cycle is recording revenue or income. For example, a company sells $10,000 worth of products in one day. They would record this transaction on their books as Revenue: $10,000.
- The second step of the accounting cycle is entering these transactions into accounts. The company’s account balance will increase by $10,000 because they sold products for that amount of money during that day. This also decreases their cash balance by $10,000 because this money was exchanged for products on credit during that day. If they were running a deficit in cash flow then they would be short in cash but long on receivables (credit).
Classifying Transactions
The first step of the accounting cycle is classifying transactions, which are financial events that happen within a company. Transactions can be classified in one of three ways: as an asset, liability, or equity transaction. Asset transactions increase assets on the balance sheet (e.g., land), while liability transactions increase liabilities on the balance sheet (e.g., accounts payable). Equity transactions involve issuing stock or paying dividends and do not affect assets or liabilities (e.g., paying employees with their own shares of stock).
Journalizing Transactions
The accounting cycle has two types of transactions, Journalizing Transactions and Posting Transactions. The journalizing transactions are the day-to-day or operational transactions. They take place during the day or at a particular event, such as when a purchase order is created or an invoice is paid. There are two types of journalizing transactions: cash receipts (CR) and cash payments (CP). The other type of transaction, posting transactions, take place at the end of an accounting period. These involve adjusting accounts for revenue earned, expenses incurred and income generated before preparing financial statements for that period.
Posting To Ledgers
Your accounting cycle assignment can be split into four parts: posting, journalizing, general ledger, and closing.
The first step in completing an accounting cycle assignment is to post all transactions (debits or credits) from your subsidiary ledgers.
Second, you’ll want to journalize these transactions by classifying them as either income or expense.
Third, you’ll want to summarize the account balances in a general ledger sheet that shows what they were at the beginning of the month/quarter/year and what they were at the end of it.
Fourth, you’ll want to close out these accounts with entries that show their new balances after each transaction has been posted (or their old balances if no transactions have occurred).
Preparing A Trial Balance
A trial balance is a list of all your accounts, their balances, and any outstanding transactions. To make a trial balance, start by entering your account headings on the left-hand side of the paper. Accounts are given abbreviations such as s/t for savings or a/c for accounts receivable. On each row below an account heading, enter that account’s opening balance at January 1st. In the right-hand column below each transaction, enter either credit or debit. If you’re unsure whether a transaction should be credited or debited, ask yourself if it increases or decreases that account’s balance.
Adjusting Entries
There are many types of adjusting entries. For example, account transfers are used when money is transferred from one account to another. The most common use of adjusting entries is for correcting mistakes. This usually involves reversing transactions that have been incorrectly recorded in a company’s financial records. These adjustments must be made with caution because they can affect the accuracy of future records. When transferring money between accounts, it is important to make sure that both sides are balanced as well as any adjustments related to these transfers.
Preparing Financial Statements
The accounting cycle refers to all of the steps that a company will go through in order to produce financial statements. You will have many deadlines during this process, as well as things that you need to take care of before you can make any progress. One such task is preparing financial statements for an internal or external audit. If you prepare these statements on your own, there are three main types that you’ll need to know how to do:
1) An Income Statement (also known as Profit and Loss Statement)
2) A Balance Sheet (also called a statement of financial condition or statement of financial position)
3) A Statement of Changes in Financial Position
Closing Entries
A closing entry records a business’s financial position at the end of an accounting cycle. The main reason for this entry is for bookkeeping purposes and to establish a balance sheet date. Closing entries are made up of five types: Assets, Liabilities, Capital, Retained Earnings (i.e., net income), and Drawings (i.e., withdrawals from the equity account). This post has provided you with a basic understanding of what closing entries are, how they’re used, as well as how they relate to other financial statements.
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FAQ
What is an Accounting Cycle?
An accounting cycle or financial reporting cycle refers to a set of activities that are often performed on an annual basis. The most common accounting cycles in use today are:
-The Cash Flow Statement, which records cash inflows and outflows during a given period of time;
-The Balance Sheet, which documents the assets, liabilities and equity at a given point in time;
-The Income Statement, which tracks revenues and expenses over a period of time.
What is an Accounting Period End Date?
At any given point in time, there are two accounting periods for each company. One is the current period, which starts on January 1st of a year, and ends on December 31st of that same year. The other period corresponds to this first one by starting at the same date, but ending one year later.
What is the difference between accrual and cash accounting?
Accrual accounting is a type of accounting that records revenues when they are earned rather than when they are received. The accrual method of bookkeeping will show a business as having more revenue at any given time than its cash balance because the money has not yet been received in hand.