The Accounting Cycle The accounting cycle helps to keep accounting records in an orderly fashion. Collect and verify source documents Analyze each transaction Journalize each transaction Posting to the general ledger Trial balance Work sheet

The Work Sheet used to collect account information needed to prepare financial statements and complete end-of-period activities most basic is the six-column format prepare in pencil (this is a rough draft)

Work Sheet Procedures Heading Account Title section who? what? when? Account Title section list all general ledger accounts and account numbers in numeric order draw straight line to indicate zero balances Trial Balance section take balances from general ledger rule and total trial balance section use straight-edge when ruling double rule if in balance

Extending Amounts Balance Sheet section (first) accounts above Income Summary 100s, 200s, and 300s except Income Summary Assets, Liabilities and (permanent) Owner’s Equity Income Statement section Income Summary and accounts below 400s and 500s and Income Summary Income Summary, Revenues and Expenses Temporary Accounts

Totaling rule and total the balance sheet and income statement sections column totals will not be equal need to calculate net income or net loss

Calculate Net Income / Net Loss calculate difference between debits and credits add difference to the smaller amount

Record Net Income / Net Loss credits greater than debits revenues greater than expenses write net income in account name column debits greater than credits expenses greater than revenues write net loss in account name column

Net Income and Capital Revenues and expenses are temporary capital accounts At end-of-period net income is transferred to capital Add net income to credit column of balance sheet to show what will happen at end-of-period capital will go up after closing entries vice versa for net loss

Complete the Work Sheet rule and total each section single rule means math is performed debits and credits must equal double rule sections double rule means your done