Show Notes
Today we will discuss the accounting cycle. This is the process taken each period to record transactions, prepare the financial statements, and to reset the temporary accounts to zero for the next period.
Keep in mind that the steps you may see in your accounting textbook or elsewhere may be slightly different - I have simplified some of the steps:
Step 1 – Record transactions as journal entries in the general ledger;
Step 2 – Prepare an unadjusted trial balance as of the end of the period;
Step 3 – Prepare adjusting journal entries and record on general ledger;
Step 4 – Prepare an adjusted trial balance as of the end of the period;
Step 5 – Prepare the financial statements;
Step 6 – Prepare and record closing journal entries to reset temporary accounts;
Step 7 – Prepare a post-closing trial balance.
More from Accounting 101 with Jimmy Stewart
I've read a lot of boring stuff so that you don't have to! Today we will summarize some of the useful information in the FASB Concepts Statements and other literature.
Example: You own a sole proprietorship. For this period, you had revenue of $100,000, wage expense of $40,000, and computer expense of $30,000 (net income of $30,000). You also contributed $10,000 to the business this period.
Today we will go over the adjusting process. This is where we make our adjusting journal entries to get from our unadjusted trial balance to our adjusted trial balance, which contains the figures we use on the financial statements and tax returns.
Today we will discuss the cost layering methods that are used within the periodic and perpetual inventory systems.