The Accounting Cycle begins Mrs. Flowers

Accounting Equation Assets = Liabilities + Owner’s Equity Equation will ALWAYS balance

ALORE A = Assets L= Liabilities O=Owner’s Equity R=Revenue E=Expenses

A=Assets Examples: Cash Accounts Receivable Supplies Prepaid Insurance (Anything owned)

L=Liabilities Examples: Accounts Payable (Any amount owed)

O=Owner’s Equity Examples: Capital (Sheryl Flowers, Capital) Drawing/Withdraw

R=Revenue Examples: Income Sales

E=Expenses Examples: Advertising expense Misc expense Rent expense Repair expense Utilities expense (Water, phone)

A=L+OE Assets (photography equipment ($15,000) + vehicle ($12,000) = Liabilities (car loan $12,000) + Owner’s Equity ($15,000) Assets ( $27,000) = Liabilities ($12,000) + Owner’s Equity ($15,000) $27,000 = $27,000

Debits/Credits Account Name Left-side debit Debits are entries made on the left side of an account column and may be abbreviated D Right-side credit Credits are entries made on the right side of an account column and may be abbreviated C

Major Steps in Accounting Cycle The following are the major steps involved in the accounting cycle. 1.Analyzing and recording transactions via journal entries 2.Posting journal entries to ledger accounts 3.Preparing unadjusted trial balance 4.Preparing adjusting entries at the end of the period

Major Steps in Accounting Cycle 5.Preparing adjusted trial balance 6.Preparing financial statements 7.Closing temporary accounts via closing entries 8.Preparing post-closing trial balance