1. Accounting cycle
Made by: Yashvi Shah

2. Accounting cycle
Accounting cycle is a step-by-step process of recording, classification and summarization of economic transactions of a business.

3. Business Transactions
The accounting cycle
Business Transactions
Journal
Ledger
Final accounts
Trial Balance

4. Business transactions
Business transactions are those which affect a business financially.
Any event which does not affect the business financially is not recorded in the accounting system.
All business transactions have 2 aspects (debit and credit)
Business transactions include: drawings, capital, purchases, sales, returns, expenses, incomes, loans, payables and receivables, etc.

5. Transaction
Debit
Credit
Bought goods on credit from Mr. Y
Purchases
Mr. Y
Received cash from Mr. X of $1200
Cash
Mr. X
Returned goods to Mr. Y
Mr.Y
Purchases returns
Bought office equipment by cheque
Office equipment
Bank

6. Journal (Books of prime entry)
Cash book- record all cash transactions (including bank)
Sales journal- record goods sold on credit
Sales returns journal- record sales returns
Purchases journal- record goods bought on credit
Purchases returns journal- record purchases returns
General journal- ???
Record opening entries, closing entries, correction of errors and assets bought and sold on credit
record opening entries, closing entries, correction of errors and assets bought and sold on credit

7. Process of transferring journal to ledger
Ledgers
Before ledgers are prepared, posting needs to be done.
Posting- ???
Each transaction from journals is posted in two different ledgers. Under one ledger, the transaction will be in the credit column, and under another ledger, the same transaction will come under the debit column.
Process of transferring journal to ledger

8. Purchases returns ledger
Ledger Example:
Goods returned to Mr. X for cash $500
Cash
Purchases returns
Date
Details $
1.1.15
Purchases returns
500
Cash ledger
Date
Details $
1.1.15
Cash
500
Purchases returns ledger

9. Trial Balance
Trial balances are used to check the arithmetical accuracy of ledgers.
It is a listing of all of the accounts in the general ledger and their balances. The debit balances are entered in one column and the credit balances are entered in another column.
The debit and credit column must equal, however if this is not the case, then a suspense account can be added which will state the difference.

10. Trial balance: what comes under debit and credit?
Assets
Liabilities
Expenses
Incomes
Losses
Gains
Prepaid expenses
Outstanding expenses
Drawings
Capital

11. Final accounts Trading account- used to calculate gross profit
Profit and loss account- used to calculate net profit
Balance Sheet- used to find the financial position
Cash flow statement- reports the cash generated and used during the time interval specified
Changes in equity- contains the change in owners equity over an accounting period.