Complete All Steps In The Accounting Cycle Principles of Cost Analysis and Management Show Slide #1: Complete All Steps In The Accounting Cycle References: FM 1-06, Excel spreadsheets, lesson created notes Facilitator Material: Each primary facilitator should possess a lesson plan, slide deck, course handouts, and practical exercise with answer key and FM 1-06. All required references and technical manuals will be provided by the School House. Learner Material: Learners should possess standard classroom supplies, course handouts, practical exercises, FM 1-06. All required references and technical manuals will be provided by the School House.

Lacy’s Statement of Financial Position Assets: Liabilities & Financial Position: Cash $130 Other Assets 79 Total: $209 Liabilities: $ 3 Financial Position: 206 Total: $209 Financial Position Why doesn’t the Ledger Account agree with the Statement of Financial Position? Show Slide #2: Concrete Experience Facilitator’s Note: (Concrete Experience 5 minutes) Discuss with the Learners “Why is it useful to know an entity’s financial position. Ask Learners what their thoughts of the question. Facilitator’s Note: (Publish and Process 5 minutes) The critical portion of this part of the ELM process is to force the Learners to reflect. Ask a series of thought influencing questions, for example: Q1: Would the Financial Position of a company determine whether or not you apply there? Q2: Could “Corporate Espionage” play a factor in a company’s financial standing? Q3: As per the books, “an insane amount of money in a short amount of time” Red flags or not? Facilitator’s Note: Accounting information should be useful. What is useful about an entity’s financial position? In one sense, it is like GPS. It tells where we are now. If we don’t know where we are now, we won’t know how to get to where we want to be, or how far we have come at a future date. It also gives a snapshot of our financial ability to continue into the future. What resources do we have available? What obligations do we have? Introduction Why doesn’t the Ledger Account agree with the Statement of Financial Position? The ledger account doesn’t agree with the Statement of Financial Position because the activities that affect financial position – revenues and expenses – are not yet reflected in the financial position account. (-) (+) 200

Terminal Learning Objective Task: Complete All Steps In The Accounting Cycle For A Time Period Condition: FM Leaders in a classroom environment working as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion. Standard: with at least 80% accuracy (70% for international students) you must: Describe the purpose of closing transactions Record closing transactions in tabular format Show Slide #3: Terminal Learning Objective Action: Complete All Steps In The Accounting Cycle For A Time Period Conditions: FM Leaders in a classroom environment working as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion. Standard: With at least 80% accuracy (70% for international students) you must: Describe the purpose of closing transactions Record closing transactions in tabular format Safety Requirements: In a training environment, leaders must perform a risk assessment in accordance with DA PAM 385-30, Risk Management. Leaders will complete a DD Form 2977 DELIBERATE RISK ASSESSMENT WORKSHEET during the planning and completion of each task and sub-task by assessing mission, enemy, terrain and weather, troops and support available-time available and civil considerations (METT-TC). Local policies and procedures must be followed during times of increased heat category in order to avoid heat related injury. Consider the work/rest cycles and water replacement guidelines IAW TRADOC Regulation 350-29. Environmental Considerations: Environmental protection is not just the law but the right thing to do. It is a continual process and starts with deliberate planning. Always be alert to ways to protect our environment during training and missions. In doing so, you will contribute to the sustainment of our training resources while protecting people and the environment from harmful effects. Refer to FM 3-34.5 Environmental Considerations and GTA 05-08-002 ENVIRONMENTAL-RELATED RISK ASSESSMENT. INSTRUCTIONAL LEAD-IN. In the event that the accounting cycle does not go full cycle, it is in the best interest of the Learners to complete the step that they started before stopping.

Post-Closing Trial Balance The Accounting Cycle Record Transactions Post-Closing Trial Balance Post to Ledger Close Accounts Prepare Trial Balance Show Slide #4: The Accounting Cycle 1. Learning Step Activity 1: Describe the purpose of closing transactions Method of Instruction: DSL (large or small group discussion) Facilitator to Learner Ratio: 2:25 Time of Instruction: 30 minutes Media: Power Point, Printed Reference Material Facilitator's Note: Before facilitating this lesson, ask the students which of the 21st Century Soldier Competency do they think pertain to this lesson? Facilitate a discussion on the answers given and at the end of the lesson revisit it and see if the students still believe their choice are the same. 1. Character and accountability 2. Communication and engagement (oral, written, and negotiation) 3. Critical thinking and problem solving 4. Tactical and technical competence (full spectrum capable) Facilitator's Note: (Facilitator Read and facilitate discussion) We have done steps 1-6 in prior lessons. Now we are going to finish the cycle with Closing transactions and the Post-closing or after-closing Trial Balance Prepare Statements Adjust Accounts Adjusted Trial Balance

Purpose of Closing Transactions Zero out the Revenue and Expense accounts Allows them to start the new period with a clean slate Transfer revenue and expense information to the Financial Position account Ending balance in Financial Position ledger account will agree with Statement of Financial Position Show Slide #5: Purpose of closing transactions Facilitator's Note: (Facilitator Read and facilitate discussion) the first purpose is to zero out the Revenue and Expense accounts. Closing the accounts allows them to start the new period with a clean slate. These accounts collect information for a period of time (to report change in financial position for a period of time) then start fresh with a zero balance at the beginning of the next period. They must be zeroed out or the information for the new period will be mingled with the information from the old period. The second purpose for the closing the accounts is to transfer revenue and expense information to the Financial Position account. After closing transactions the ending balance in Financial Position ledger account will agree with Statement of Financial Position

Zeroing the Accounts If I want to know how much rain falls in the next 24 hours, I must empty the rain gauge of all rain collected in the past. Show Slide #6: Zeroing the Accounts Facilitator's Note: (Facilitator Read and facilitate discussion) If I want to know how much rain falls in the next 24 hours, I must empty the rain gauge of all rain collected in the past. The same is true of the revenue and expense accounts. If we want to know how much revenue is earned next month, we must empty the revenue account of all of the revenue earned this month. Otherwise the information for the two months will be mingled together.

Transferring to Financial Position Revenues Financial Position Expenses Show Slide #7: Transferring to Financial Position Facilitator's Note: (Facilitate discussion using the slide) The other reason for the closing entries is to transfer the revenue and expense information to the Financial position ledger account, so that it reflects the balance shown on the statement of financial position.

LSA #1 Check on Learning Q1. What are the two purposes for closing transactions? A1. To zero out the revenue and expense accounts. Make the ledger balance for financial position agree with the Statement of Financial Position Show Slide #8: LSA #1 Check on Learning Facilitator’s Note: Ask the following Check on Learning questions, facilitate the answers given. Q1. What are the two purposes for closing transactions? A1: To zero out the revenue and expense accounts To make the ledger balance for financial position agree with the Statement of Financial Position

LSA #1 Summary During this block, we discussed why closing out the revenue and expense accounts are necessary in order to make the Post Close Trial Balance reconcile with it’s Debits and Credits. Show Slide #9: LSA #1 Summary Facilitator's Note: LSA Summary slide will be at the end of this lesson.

Lacy’s Ledger Cash Other Assets Liabilities (+) 200 15 5 50 -------------- 130 (-) 20 10 5 65 40 ---------------- (+) 20 65 40 -------------- 79 (-) 5 60 1 --------------- (-) 40 ---------------- (+) 40 3 --------------- Financial Position Revenues Expenses Show Slide #10: Lacy’s Ledger 2. Learning Step Activity 2: Record closing transactions in tabular format Method of Instruction: DSL (large or small group discussion) Facilitator to Learner Ratio: 20 minutes Time of Instruction: Media: Power Point, Printed Reference Material Facilitator's Note: (Facilitate discussion using the slide) the revenue and expense accounts, like the rain gauge, must be emptied so that they will accurately collect next month’s information. The revenue account has a credit balance of 85. To close it, we must subtract 85. Subtractions are recorded on the debit side of the revenue account. We record a debit to the revenue account and a credit to Financial Position. (-) (+) 200 85 (-) --------------- 85 (+) 15 20 50 --------------- 85 (+) 10 5 60 1 3 --------------- 79 (-)

Lacy’s Ledger (Cont.) Cash Other Assets Liabilities (+) 200 15 5 50 -------------- 130 (-) 20 10 5 65 40 ---------------- (+) 20 65 40 -------------- 79 (-) 5 60 1 --------------- (-) 40 ---------------- (+) 40 3 --------------- Financial Position Revenues Expenses Show Slide #11: Lacy’s Ledger (Cont.) Facilitator's Note: (Facilitate discussion using the slide) similarly, we must close the expense account. The expense account has a debit balance of 79. To close it, we must subtract 79. Subtractions are recorded on the credit side of the expense account. We record a credit to the Expense account and a debit to Financial Position. (-) 79 (+) 200 85 (-) --------------- 85 (+) 15 20 50 --------------- 85 (+) 10 5 60 1 3 --------------- 79 (-) -------------- 79

Lacy’s Ledger (Cont.) Cash Other Assets Liabilities (+) 200 15 5 50 -------------- 130 (-) 20 10 5 65 40 ---------------- (+) 20 65 40 -------------- 79 (-) 5 60 1 --------------- (-) 40 ---------------- (+) 40 3 --------------- Financial Position Revenues Expenses (-) 79 --------------- Show Slide #12: Lacy’s Ledger (Cont.) Facilitator's Note: (Facilitate discussion using the slide) now that closing transactions have been recorded and posted, the Revenue and Expense accounts both show a zero balance. The Financial position shows a credit balance of 206. (Credits of 285 minus the debit of 79) (+) 200 85 -------------- 206 (-) --------------- 85 (+) 15 20 50 --------------- 85 (+) 10 5 60 1 3 --------------- 79 (-) -------------- 79

Recording Closing Transactions Transaction Description Cash + Other Assets = Liab Financial Position Rev – Exp Balance Forward 130 79 3 200 85 - Close Revenues +85 -85 New Balance 285 Close Expenses -79 206 Transaction Description Cash + Other Assets = Liab Financial Position Rev – Exp Balance Forward 130 79 3 200 85 - Close Revenues New Balance Close Expenses Show Slide #13: Record closing transactions Facilitator's Note: Learners will have the blank slide. Record the closing transactions in the table: Facilitator's Note: Advance slide (Facilitate discussion using the slide) Explains the following: The balance forward (after adjusting entries) was: Cash 130 + other assets 79 = Liabilities 3 + Financial position 200 + Revenue 85 – Expenses 79 Revenue decreases by 85 and financial position increases by 85. Expenses decrease by 79 and financial position decreases by 79. The ending balance is: Cash 130 + other assets 79 = Liabilities 3 + Financial position 206 + Revenue 0 – Expenses 0 At the end of all activity, the equation is still in balance. Cash + Other assets = 209, and Liabilities + Financial Position = 209 209 209

Post-Closing Trial Balance The post-closing or after-closing trial balance is a list of all of the accounts and their balances, omitting the accounts with a zero balance. Therefore, there will be no revenues or expenses on the post-closing trial balance, because the balance in each of those accounts is zero after the closing process. Show Slide #14: Post-Closing Trial Balance Facilitator's Note: (Facilitate discussion using the slide) The post-closing or after-closing trial balance is a list of all of the accounts and their balances, omitting the accounts with a zero balance. Therefore, there will be no revenues or expenses on the post-closing trial balance, because the balance in each of those accounts is zero after the closing process.

Lacy‘s Post-Closing Trial Balance Account Title dr. cr.  Cash $130     Other Assets 79   Liabilities $ 3  Financial Position 206 Totals  $209 $209  Show Slide #15: Lacy‘s Post-Closing Trial Balance Facilitator's Note: (Facilitate discussion using the slide) as expected, the post-closing (or after closing) trial balance only includes assets, liabilities, and financial position. There are no revenues or expenses because those accounts have been closed.

Accounting Cycle Spreadsheet Statement of Activity shows ending balance in Financial Position Lacy’s Show Slide #16: Accounting Cycle Spreadsheet Facilitator's Note: (Facilitate go over the Accounting Cycle spreadsheet on the next five slides that the learner will use during the PE. (Crawl / Walk Phase) you will use the Accounting Cycle spreadsheet to complete your practical exercise which will take you through the complete accounting cycle. The Statement of Activity shows ending balance in Financial Position. The statement is generated automatically using the adjusted account data.

Accounting Cycle Spreadsheet (Cont.) Total Assets equal Total Liabilities and Equity Lacy’s Show Slide #17: Accounting Cycle Spreadsheet Facilitator's Note: (Crawl / Walk Phase) The Ending balance sheet shows that assets equal liabilities + equity.

Accounting Cycle Spreadsheet (Cont.) After Closing, the Revenue and Expense accounts have zero balances Show Slide #18: Accounting Cycle Spreadsheet Facilitator's Note: (Crawl / Walk Phase) The Closing transactions tab. After closing transactions the revenues and expenses have zero balances.

Accounting Cycle Spreadsheet (Cont.) After Closing, the Financial Position balance agrees with the Statement of Activities Show Slide #19: Accounting Cycle Spreadsheet Facilitator's Note: (Crawl / Walk Phase) After Closing, the Financial Position balance agrees with the Statement of Activities.

Accounting Cycle Spreadsheet (Cont.) The Post-closing Trial Balance includes only Assets, Liabilities and Financial Position Show Slide #20: Accounting Cycle Spreadsheet Facilitator's Note: (Crawl / Walk Phase) The Post-closing Trial Balance includes only Assets, Liabilities and Financial Position.

LSA #2 Check on Learning Q1. When the Expense account is closed, what is the effect on the Financial Position account? A1. It is Decreased Q2. What accounts should be included on the Post-Closing Trial Balance? A2. Assets, Liabilities, Financial Position Show Slide #21: LSA #2 Check on Learning Facilitator’s Note: Ask the following Check on Learning questions, facilitate the answers given. Q1. When the Expense account is closed, what is the effect on the Financial Position account? A1. It is Decreased Q2. What accounts should be included on the Post-Closing Trial Balance? A2. Assets, Liabilities, Financial Position

LSA #2 Summary During this lesson, we discussed the purposes for closing transactions within the accounting cycle, and then recorded the closures in tabular format. Formulas were then used for computation. Show Slide #22: LSA #2 Summary Facilitator's Note: In this lesson, we discussed the purposes for closing transactions within the accounting cycle, and then recorded the closures in tabular format. Formulas were then used for computation.

Practical Exercise Show Slide #23: LSA #2; Practical Exercise Facilitator's Note: This is the Run phase. Learners will take the aforementioned informational exercise and apply it to the Run phase.

TLO Summary Task: Complete All Steps In The Accounting Cycle For A Time Period Condition: FM Leaders in a classroom environment working as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion. Standard: with at least 80% accuracy (70% for international students) you must: Describe the purpose of closing transactions Record closing transactions in tabular format Show Slide #24: TLO Summary Facilitator’s Note: Restate TLO Action: Complete All Steps In The Accounting Cycle For A Time Period Conditions: FM Leaders in a classroom environment working as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion. Standard: With at least 80% accuracy (70% for international students) you must: Describe the purpose of closing transactions Record closing transactions in tabular format “Or” Facilitator's at this time, have one learner from each group to explain the most important take away to them from this lesson. Facilitate a discussion on each answer.