chapter4 - CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE...

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Chapter 4-1 CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE ACCT100 Autumn 2011 Teresa Chu Chapter 4-2 Summary of the Accounting Cycle 1. Analyze business transactions 2. Journalize the transactions 6. Prepare an adjusted trial balance 7. Prepare financial statements 8. Journalize and post closing entries 9. Prepare a post-closing trial balance 4. Prepare a trial balance 3. Post to ledger accounts 5. Journalize and post adjusting entries Illustration 4-12 Steps 1 to 3: Daily Steps 4 to 7: Monthly, quarterly or annually Steps 8 to 9: End of annual accounting period
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Chapter 4-3 Closing Entries Illustration 4-5 Purpose: make the accounts ready for the next period at the end of this accounting period Temporary accounts: relate only to a given period Permanent accounts: relate to 1 or more period Chapter 4-4 Formally recognize in the ledger the transfer of net income (or net loss) and owner’s drawing to owner’s capital “Income Summary” account assists in the closing process Result in zero balance in each temporary account (double underline) hence data in 1 accounting period is separated from another accounting period Only permanent accounts are carried forward to next accounting period Closing Entries
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Chapter 4-5 (Individual) Revenues
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chapter4 - CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE...

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