Completing The Cycle

Card Set Information

Author:
Lea_
ID:
310165
Filename:
Completing The Cycle
Updated:
2015-10-23 19:47:39
Tags:
ACC110
Folders:

Description:
Completing The Cycle
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user Lea_ on FreezingBlue Flashcards. What would you like to do?


  1. Temporary Accounts
    Relate to only a given accounting period and are closed off at the end of each accounting period (revenues, expenses, dividends).
  2. Permanent Accounts
    Are not closed as their balances are carried forward to the next accounting period (assets, liabilities, equity).
  3. Closing Entries
    Are used to transfer the temporary account balances to the permanent equity account (retained earnings account).

    Produce a zero balance in each temporary account.
  4. Closing to an Income Summary Account
    • Dr Revenue
    • Cr Income Summary

    The revenue accounts now have a zero balance.

    • Dr Income Summary
    • Cr Expense

    The expense accounts will now have a zero balance.
  5. Closing to Retained Earnings
    Balance in the Income Summary account is the profit/lose.

    • Profit = 
    • Dr Income Summary
    • Cr Retained Earnings

    • Loss = 
    • Dr Retained Earnings
    • Cr Income Summary
  6. Closing Dividends/Drawings
    Is closed to Retained Earnings account.

    All temporary accounts will have a zero closing balance.
  7. Post-closing Trial Balance
    A list of all permanent accounts and their balances after closing entries are journalised and posted.

    Proves the equality of the permanent accounts that are carried forward to the next accounting period.
  8. Accounting Cycle Steps
    1 - Analyse transactions

    2 - Journalise transactions

    3 - Post to ledger accounts

    4 - Prepare a trial balance

    5 - Journalise and post adjusting entries (prepayments/accruals)

    6 - Prepare an adjusted trial balance

    7 - Prepare financial statements (Income Statement, Statement of Changes in Equity, Statement of Financial Position

    8 - Journalise and post closing entries

    9 - Prepare a post-closing trial balance

What would you like to do?

Home > Flashcards > Print Preview