1. Page 1 Completing the Accounting Cycle

2. Page 2 JOIN KHALID AZIZ COACHING CLASSES OF CA MODULE B & D. FA, ECONOMICS & COST ACCOUNTING. CONTACT NOW. 0322-3385752

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4. Page 4 JOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA. COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA. CONTACT: 0322-3385752 R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN

5. Page 5 Outline Describe the preparation of adjusted trial balance Describe and prepare a worksheet and describe its usefulness. Describe the closing process and explain why temporary accounts are closed each period. Prepare closing entries.

6. Page 6 Accounting Cycle 1.Analyze Transactions 2. Journalize 3. Post 4. Unadjusted trial balance 5. Adjust 6. Adjusted trial balance 7. Prepare finance statements 8.Close8.Close Start the next cycle

7. Page 7 What We Have Done? So far we have discussed the following steps in the accounting cycle: –Analyzing –Recording –Posting –Unadjusted trial balance –Adjusting –Adjusted trial balance Let’s start from the worksheet

8. Page 8 What are on the Worksheet? A worksheet includes following columns: –Unadjusted trial balance. –Adjusting entries –Adjusted trial balance. –income statement –Balance sheet Worksheet can be used to simplify the preparation of financial statements.

9. Page 9 A Blank Worksheet

10. Page 10 Steps in preparation of the worksheet Step 1: Enter the accounts and unadjusted trial balance Step 1: Enter the accounts and unadjusted trial balance

11. Page 11 Steps in preparation of the worksheet Step2: Entry the adjusting entries’ Step2:

12. Page 12 Steps in preparation of the worksheet Step3: Entry the adjusted trial balance Step3:

13. Page 13 Steps in preparation of the worksheet Step4: Entry Adjusted Amounts to Income Statement Columns Step4:

14. Page 14 Steps in preparation of the worksheet Step5: Entry Adjusted Amounts to Balance sheet Columns Step5:

15. Page 15 Preparing the Financial Statements Financial Statements can be prepared easily using the completed worksheet. The nature and the preparation of Financial Statement will be discussed in lesson 9

16. Page 16 Closing Process The closing process occurs at the end of an accounting period after financial statements are prepared. Reasons for closing entries: –Resets revenue and expense account balances to zero at the end of the period. –Updates the retained earnings account to reflect net income and distributions.

17. Page 17 Temporary and Permanent Accounts Temporary accounts are also called nominal accounts. They are opened at the beginning of a period, used to record events for that period and closed at the end of the period. They accumulate data related to one accounting period only.

18. Page 18 Temporary Accounts Income Summary Revenues Expenses The closing process applies only to temporary accounts.

19. Page 19 Permanent Accounts AssetsLiabilities Owner’s Capital The closing process does not apply to permanent accounts.

20. Page 20 Steps in the Closing Process Set an Income Summary account. Close Revenue accounts to Income Summary. Close Expense accounts to Income Summary. Close Income Summary account to Retained Earnings

21. Page 21 Close R evenue Accounts to Income Summary The entries : Dr. Sales Revenue 61000 Interest Revenue 2917 Cr. Income Summary 63917 The entries : Dr. Sales Revenue 61000 Interest Revenue 2917 Cr. Income Summary 63917

22. Page 22 Close Expense Accounts to Income Summary The entries: Dr. Income 86600 Cr. Cost of Sales 30000 Operating Expense 56600 The entries: Dr. Income 86600 Cr. Cost of Sales 30000 Operating Expense 56600

23. Page 23 Close Income Summary to Retained Earnings The Entries: Dr. Income Summary 22683 Cr. Retained Earnings 22683 The Entries: Dr. Income Summary 22683 Cr. Retained Earnings 22683

24. Page 24 The Closing Entries Close r evenue accounts to Income Summary. The entries are: Dr. All Revenue Cr. Income Summary

25. Page 25 The Closing Entries Close e xpense accounts to Income Summary. The entries are: Dr. Income Summary Cr. All Expenses

26. Page 26 The Closing Entries Close I ncome Summary account to Retained Earnings. –If there is a profit, the entries are: Dr. Income Summary Cr. Retained Earnings –If there is a loss, the entries are: Dr. Retained Earnings Cr. Income Summary

27. Page 27 Post-Closing Trial Balance Post-Closing Trial Balance is a list of balances for all accounts that not closed. The purpose of a post-closing trial balance is to verifies that: –Total debits = total credits for permanent accounts. –All temporary accounts have zero balances

28. Page 28 Post-Closing Trial Balance

29. Page 29 ECONOMICS OF ICMAP, ICAP, MA- ECONOMICS, B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA. COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA. CONTACT: KHALID AZIZ 0322-3385752 R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN