Welcome to Module 4

Completing the Accounting Cycle

In the world of accounting, completing the accounting cycle is a crucial process that ensures all financial transactions are accurately recorded and summarized. This cycle consists of several steps that help organizations prepare their financial statements and assess their overall financial health. Let's explore each step of the accounting cycle in detail.

Step 1: Analyzing Transactions

The first step in completing the accounting cycle is to analyze all financial transactions that have taken place during a specific period. This involves reviewing invoices, receipts, and other financial documents to understand the nature of each transaction. Accountants classify these transactions into different categories, such as revenue, expenses, assets, and liabilities.

Step 2: Journalizing Transactions

Once all transactions have been analyzed, the next step is to record them in the general journal. In this step, accountants use double-entry accounting to ensure that each transaction is recorded accurately and that debits equal credits. This process helps maintain the balance in the accounting records.

Step 3: Posting to the General Ledger

After journalizing transactions, the next step is to post them to the general ledger. The general ledger contains all the accounts of a company, such as cash, accounts receivable, and accounts payable. By posting the journal entries to the general ledger, accountants can keep track of the balances in each account.

Step 4: Preparing a Trial Balance

Once all transactions have been posted to the general ledger, the accountant prepares a trial balance. The trial balance lists all the accounts and their balances to ensure that debits equal credits. If the trial balance does not balance, it indicates that there may be errors in the accounting records that need to be corrected.

Step 5: Making Adjusting Entries

After preparing the trial balance, accountants make adjusting entries to account for any accruals or deferrals that have not been recorded during the accounting period. Adjusting entries helps ensure that the financial statements reflect the true financial position of the company. Common types of adjusting entries include recording depreciation, recognizing unearned revenue, and accruing expenses.

Step 6: Preparing Financial Statements

Once all adjusting entries have been made, the next step is to prepare the financial statements. The financial statements include the income statement, balance sheet, statement of cash flows, and statement of changes in equity. These statements provide valuable information about the company's financial performance and position.

Step 7: Closing Entries

The final step in completing the accounting cycle is to make closing entries. Closing entries transfer the balances of temporary accounts, such as revenue and expenses, to the retained earnings account. This process resets the temporary accounts to zero and prepares them for the next accounting period.

In conclusion, completing the accounting cycle is essential for organizations to maintain accurate financial records and assess their financial health. By following these steps, accountants can ensure that financial transactions are properly recorded, summarized, and reported. Mastering the accounting cycle is key to making informed business decisions and complying with financial reporting requirements.

Module Learning Outcomes

Upon successful completion of this module, you will be able to:

LO1: Explain and prepare a classified balance sheet.
LO2: Compute and analyze the current ratio.
LO3: Prepare a worksheet and explain its usefulness.
LO4: Prepare closing entries and a post-closing trial balance.
LO5: Prepare reversing entries and explain their purpose.

(CLO = Course Learning Outcome)

To Do

Please read/watch all of the module learning materials (readings, presentations, videos, etc.) and complete all assignments/assessments listed below. If you have questions, please contact the course instructor or ask in the Questions About This Course forum.

Readings and Presentations:

Work Sheet As A Tool
Closing Process
Accounting Cycle
Classified Balance Sheet
Reversing Entries

Lecture, PowerPoint, and Videos:

Instructor Lecture
PowerPoint
Exercise PowerPoint Presentations
Accessing CONNECT for Chapter Videos
To fully engage with the content covered in this chapter, accessing CONNECT by clicking on the link provided is essential. By utilizing CONNECT, you will have seamless access to a wealth of supplementary resources and interactive tools that will enhance your understanding of the concepts discussed in the videos. Taking advantage of this platform will deepen your comprehension and positively impact your overall learning experience. So, take advantage of this valuable opportunity to unlock a wealth of knowledge at your fingertips - access CONNECT today!

Assignments/Assessments:

Discussion Board: Discussion (Chapter 4) - What are the steps in recording closing entries?
Assignment: For this Chapter's quiz and homework, you will need to access CONNECT by clicking on the provided link (Chapter 4).
Assignment: Midterm - (Chapters 1 - 4)

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