©NETg, The Accounting Cycle, Revised Edition The Accounting Cycle Welcome to

©NETg, The Accounting Cycle, Revised Edition Course Objectives In this course, you will learn: The eleven-step accounting cycle The eleven-step accounting cycle How to use recordkeeping systems How to use recordkeeping systems Key accounting vocabulary Key accounting vocabulary The differences between cash and accrual accounting The differences between cash and accrual accounting Accounting decision making Accounting decision making S1

©NETg, The Accounting Cycle, Revised Edition Agenda S2 Introduction 20 minutes Module 1: Overview of Accounting 70 minutes Break 10 minutes Module 1: Overview of Accounting (cont’d) 20 minutes Module 2: Ledger and Journal 70 minutes Lunch Break 30 minutes Module 3: Adjusting Entries 35 minutes Module 4: Closing Entries 45 minutes Module 5: The Balance Sheet and Income Statement 10 minutes Break Module 5: The Balance Sheet and Income Statement (cont’d) 65 minutes Conclusion 10 minutes

©NETg, The Accounting Cycle, Revised Edition Types of Businesses S3

©NETg, The Accounting Cycle, Revised Edition Forms of Business Ownership S4

©NETg, The Accounting Cycle, Revised Edition The Accounting Cycle S5

©NETg, The Accounting Cycle, Revised Edition Steps in the Accounting Cycle S6 1. Business transactions are created 2. Analyze and record transactions 3. Post information from journal to ledger 4. Prepare trial balance

©NETg, The Accounting Cycle, Revised Edition Steps in the Accounting Cycle (cont’d) S7 5. Journalize adjusting entries 6. Post adjustments from journal to ledger 7. Prepare adjusted trial balance

©NETg, The Accounting Cycle, Revised Edition Steps in the Accounting Cycle (cont’d) 8. Journalize closing entries 9. Post closing entries from journal to ledger 10. Prepare post-closing trial balance 11. Prepare financial statements S8

©NETg, The Accounting Cycle, Revised Edition Five Basic Categories of Recordkeeping S9

©NETg, The Accounting Cycle, Revised Edition Single-Entry Recordkeeping S10

©NETg, The Accounting Cycle, Revised Edition Double-Entry Accounting S11

©NETg, The Accounting Cycle, Revised Edition Steps in Double-Entry Accounting 1. Identify key words in a transaction 2. Identify at least two accounts affected 3. Classify accounts 4. Increase or decrease accounts 5. Record the entry S12

©NETg, The Accounting Cycle, Revised Edition Teeter-Totter Double-Entry S13

©NETg, The Accounting Cycle, Revised Edition Debits and Credits S14

©NETg, The Accounting Cycle, Revised Edition General Rules for Adjusting Entries  End of the month or accounting period  Cash is never used  Expense or revenue account is used –Expenses are normally debits –Revenues are normally credits S15

©NETg, The Accounting Cycle, Revised Edition The Accounting Cycle: Adjusting Entries S16

©NETg, The Accounting Cycle, Revised Edition Categories for Adjusting Entries Assets Assets Liabilities Liabilities Accrued Expenses Accrued Expenses Accrued Revenue Accrued Revenue S17

©NETg, The Accounting Cycle, Revised Edition The Four Basic Entries to Closing Accounts Close all revenue accounts. Close all revenue accounts. Close all expense accounts. Close all expense accounts. Close the income summary account and recording NI or NL. Close the income summary account and recording NI or NL. Close the withdrawal account. Close the withdrawal account. S18

©NETg, The Accounting Cycle, Revised Edition Preparation of the Financial Statements S19

©NETg, The Accounting Cycle, Revised Edition The Income Statement S20

©NETg, The Accounting Cycle, Revised Edition Income Statement Comparisons S21

©NETg, The Accounting Cycle, Revised Edition Inventory Flow Methods Specific invoice Specific invoice Weighted average Weighted average First-in, first-out First-in, first-out Last-in, first-out Last-in, first-out S22