Complete All Steps In The Accounting Cycle Principles of Cost Analysis and Management

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? (-) (+) 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

Post-Closing Trial Balance The Accounting Cycle Record Transactions Post-Closing Trial Balance Post to Ledger Close Accounts Prepare 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

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.

Transferring to Financial Position Revenues Financial Position Expenses

LSA #1 Check on Learning Q1. What are the two purposes for closing transactions? A1. 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

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.

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 (-) (+) 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 (-) 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 --------------- (+) 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 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.

Lacy‘s Post-Closing Trial Balance Account Title dr. cr.  Cash $130     Other Assets 79   Liabilities $ 3  Financial Position 206 Totals  $209 $209 

Accounting Cycle Spreadsheet Statement of Activity shows ending balance in Financial Position Lacy’s

Accounting Cycle Spreadsheet (Cont.) Total Assets equal Total Liabilities and Equity Lacy’s

Accounting Cycle Spreadsheet (Cont.) After Closing, the Revenue and Expense accounts have zero balances

Accounting Cycle Spreadsheet (Cont.) 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

LSA #2 Check on Learning Q1. When the Expense account is closed, what is the effect on the Financial Position account? A1. Q2. What accounts should be included on the Post-Closing Trial Balance? A2. 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.

Practical Exercise

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