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COMPLETING THE ACCOUNTING CYCLE

COMPLETING THE ACCOUNTING CYCLE. ACT 2112 KUMPULAN 8 SHERLIZA PUAT NELSON. Content. Accrual accounting Adjusting entries Closing the books Summary of the accounting cycle Adjusting entries: Original entries to expense or revenue. Accounting Cycle. Step 1- Analyse transaction

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COMPLETING THE ACCOUNTING CYCLE

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  1. COMPLETING THE ACCOUNTING CYCLE ACT 2112 KUMPULAN 8 SHERLIZA PUAT NELSON ACT 2112 KUMPULAN 8 SHERLIZA

  2. Content • Accrual accounting • Adjusting entries • Closing the books • Summary of the accounting cycle • Adjusting entries: Original entries to expense or revenue ACT 2112 KUMPULAN 8 SHERLIZA

  3. Accounting Cycle • Step 1- Analyse transaction • Step 2- Record effects of transactions • Prepare journal entries • Step 3- Summarise effects • Posting to ledgers • Prepare Trial Balance • Step 4- Prepare reports ACT 2112 KUMPULAN 8 SHERLIZA

  4. Time period concept • Fiscal year/ financial year • Periodic reporting ACT 2112 KUMPULAN 8 SHERLIZA

  5. Accrual basis accounting • A system of accounting in which revenues and expenses are recorded as they are earned and incurred, and not necessarily when cash is received or paid. • Cash basis? ACT 2112 KUMPULAN 8 SHERLIZA

  6. Revenue recognition principle? • Matching principle? ACT 2112 KUMPULAN 8 SHERLIZA

  7. Accounting cycle • Adjustments • Prepaid revenue • Accrued revenue • Prepaid expenses • Accrued expenses ACT 2112 KUMPULAN 8 SHERLIZA

  8. Prepaid revenue • Unearned revenues • Cash paid for services not yet been performed/ rendered. • In the future, company is obliged to provide the services. • Customer/client paid in advance for your services. ACT 2112 KUMPULAN 8 SHERLIZA

  9. Accrued revenue • Unrecorded receivables • Services that had been performed but had not been paid for. • No cash had been received after services had been carried out. ACT 2112 KUMPULAN 8 SHERLIZA

  10. Prepaid expenses • Company had paid for the expenses in advance. • Example, rent expenses that had been for 12 months. ACT 2112 KUMPULAN 8 SHERLIZA

  11. Accrued expenses • Unrecorded liabilities • Payables • Expense that had occurred but had not been paid for. • Example, electricity bills for the month but will only be paid next month. ACT 2112 KUMPULAN 8 SHERLIZA

  12. Accounting cycle – Step 4 • Financial Statements • Income Statement/ Trading,Profit and Loss Account. • Statement of Retained Earnings • Balance Sheet ACT 2112 KUMPULAN 8 SHERLIZA

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