The Accounting Cycle

By Caleb Speelman

Brief Summary

The accounting cycle can be complex, here is a basic summary. The accounting cycle begins at the end of the month. A business records the transactions in a journal. The information is transferred to a ledger. With data from the ledger, the bank reconciliation form can be completed. Continuing from the bank form, a worksheet is created separating the accounts. Fees and Expenses into the income sheet, and Assets, Liabilities and Owner's Equity into the balance sheet. Multiple forms are created and compared from this sheet, with a trial balance to end the cycle, confirming all numbers were recorded correctly.
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Step One

The first step is too gather the payment forms and record them in a journal. This journal is called the General Journal. All of the transactions are recorded here, showing witch account was debited and which was credited. The source which was used to determine this is also added, for reference if needed.

Step

The information recorded in the general journal is then transferred to the General Ledger. The General Ledger contains each active account name and number. Each transaction occurring to that account is recorded as a debit or credit. A final balance is then totaled for each account.

Step Three

A trial balance is created based upon the information from the ledger. A trial balance used by accountants is to help check that the amounts recorded are recorded correct, if not the person will have to go back and find the error. The accounts are listed with their balances either debit or credit. If they come out to be equal then all is recorded correct so far.

Step Four

The worksheet is like the stem of the tree. A worksheet is used to collect all the data from the general ledger on to one sheet of paper. From it comes 3 important sheets, the balance sheet, the income sheet, and the statement of change in Owner's Equity. These sheets help us determine the net profit or loss.

Step Five

Once a Net outcome is found, the temporary account must be closed. Net income or Net loss is the outcome of a business, income means the business made money, loss means the business lost money. The temporary accounts are debited or credited to the income summary account. This is recorded in the ledger. The total debit or credit account is added to the cash in bank.

Step Six

The final step is another trial balance. This balance confirms again the numbers were recorded correctly. An error could result in damage to the business.

MVP

The MVP or (Most Valuable Paper) is without a doubt the worksheet. The work sheet is the tree that branches off into Balance sheet, income sheet and the statement of change in Owner's Equity. which provides the business the information or net income or loss.

Possible App

A good app idea would be one that electronically helps you reconcile bank statement.

When you receive your bank statement you put the bank's amount first, then fill out based on the numbers it gives you. On the final screen it shows you all the work and steps it took, plus the final result.

Net Income/Loss

In 2015 Walmart suffered and net loss of 0.1%.

However as of now they are operating at a net income of 14,694,000.

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lecture 6 - the accounting cycle