The Accounting Cycle Flashcards
What is a General Journal?
a. A list of transactions organized chronologically
What is a General Ledger?
Reorganize transactions by like items. AKA Posting to the ledger
What is the accounting cycle?
A collective process of identifying, analyzing, and recording the accounting events of a company
What are the steps of the accounting cycle?
a. Collect and analyze transactions
b. Record/post transactions to the ledger
c. Prepare an trial balance
d. Prepare adjusting entries at the end of the period
e. Prepare an adjusted trial balance
f. Prepare financial statements
What is the trial balance
A statement of all debits and credits in a double entry account book, with any disagreement indicating an error
What are the 4 main financial statements?
The Income (P&L) statement
The balance sheet
The statement of Equity
The statement of Cash Flow
What is the Balance Sheet?
It reports assets, liabilities and equity at a specific point in time; it indicates company’s financial position; and it provides owners insight for decisions involving money.
What is the Income Statement?
It shows revenue and expenses during a specific period; is used for reporting taxes owed, loan applications or when looking to improve business operations.
What is the statement of Equity?
It reports the changes in company’s equity from opening balance to the end of a period; it shows the owner’s capital at the beginning of the reporting period and the changes that have affected that capital at the end of the reporting period.
What is the statement of Cash Flow?
It shows the sources and uses of cash by a business; it is the Balance Sheet + Income statement
How do you check a balance sheet?
Assets - Liabilities = Equity
How is the Income Statement used?
It provides the net income/loss used in the Balance sheet.
What is the calculation for Equity?
Opening retained earnings + owner cont. + net income - withdrawals = ending owner’s equity
