1. ACCOUNTING CYCLE OF A CORPORATION

2. ACCOUNTING OF A CORPORATION
The accounting cycle of a corporation is essentially the same as that of a sole proprietorship and a partnership.
At the end of the accounting period, the results of operations of the corporation and its financial position are determined and the following problems are normally encountered:
Preparation of a worksheet
Preparation of financial statements
a. Statement of Financial Position
b. Statement of Financial Operation
c. Statement of Changes in Owner’s Equity
d. Statement of Cash Flows
3. Preparation of adjusting and closing entries

3. PREPARATION OF A WORKSHEET
A worksheet is a working paper that facilities the preparation of financial statements. However, before it can be prepared and completed, data for adjustments must first be compiled. Data requiring adjustments at the end of the accounting period include:
Accrued expense
Accrued revenue
Prepaid expense
Unearned or deferred revenue
Uncollectible accounts
Depreciation and other cost allocation

4. PREPARATION OF FINANCIAL STATEMENTS

5. STATEMENT OF FINANCIAL POSITION
The Statement of Financial Position (balance sheet) reports the financial condition of a company as of a particular date.
It contains the assets, liabilities and equity of the business. The assets and liabilities should be properly classified as current or noncurrent.

6. STATEMENT OF FINANCIAL POSITION
The equity section of the Statement of Financial Position of a corporation is called Shareholder’s Equity or Stockholder’s Equity and is called Contributed Capital and Retained Earnings.

7. Contributed Capital
The Contributed Capital represents corporate capital arising from investment by shareholders. It is further divided into two sections:
1. Share Capital or Capital Stock – this also known as legal capital. This section reports both preference (preferred) and ordinary (common) share capital issued subscribed and distributable as dividends, stated at par or stated value.

8. Contributed Capital
2. Additional Paid-In Capital – this section reports investment by shareholders in excess of the par or stated value of the share capital. It includes paid in capital in excess of par value or stated value of both preference and ordinary share capital.

9. RETAINED EARNINGS
The Retained Earnings balance represents undistributed earnings of the corporation. It represents capital of the corporation arising from its operations. The balance of the account is generally divided into two parts, as follows:
Appropriated RE – it is the portion of RE set aside for a particular purpose.
Unappropriated RE – it is the portion of RE available for distribution as dividends to the shareholders.

10. STATEMENT OF FINANCIAL OPERATIONS
This statement shows the results of operations. It reports revenue and gains realized and expenses and losses incurred during a period.
The excess of revenue and gains over expenses and losses is profit; the excess of expenses and losses over revenue and gains is loss.

11. STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY
This statement is one of the basic financial statements that should be prepared. This statement reports transactions or items that cause changes in shareholder’s equity account balances. The statement shows the following:
The profit or loss for the period.
Capital share transactions with shareholders and distributions to shareholders (dividends)
The balance of Retained Earnings at the beginning and end of the period and the movement for the period.
Gains and losses that are reported directly in equity.

12. PREPARATION OF ADJUSTING AND CLOSING ENTRIES
The adjusting entries of a corporation are similar to those of a sole proprietorship and partnership. No special problems are encountered in the preparation of adjusting entries.
Closing entries on the other hand consist of the following:
Closing the balances of revenue accounts to Income Summary
Closing the balances of expense accounts to Income Summary
Closing the balance of Income Summary to Retained Earnings.