Steps of Accounting Cycle

Steps of accounting cycle
1. Prepare journal entries
2. Post to the ledger
3. Prepare unadjusted trial balance
4. Prepare adjusting journal entries
5. Prepare adjusted trial balance
6. Prepare financial statements
7. Prepare closing entries
8. Prepare post-closing trial balance
T-Accounts
1. Left side of a T-account represents debit.
2. Right side of a T-account represents credit.
3. Normal balance
Trial Balance
1. List of all accounts
2. Total debit balances = Total credit balances
3. Checking whether debit and credit balances are equal.
4. Trial balance lists of all accounts with the balance either on debit or credit side.
5. Total debit balances should be equal to total credit balances.
6. The purpose of trial balance is to check whether debit and credit balances are equal.
Exercise
Entity H had the following transaction in December 20×1
1. December 1, owner invested $120,000 in the business.
2. December 1, paid $5,500 rent for December 20×1.
3. December 2, purchased equipment and issued a $36,000 note payable in May 20×2.
4. December 8, purchased merchandise at $71,000 on account.
5. December 15, sold merchandise at $60,000 on account.
6. December 15, the cost of goods sold was $42,000.
7. December 19, paid $50,000 accounts payable to the supplier.
8. December 30, collected $45,000 accounts receivable from the customer.
9. December 31, paid $4,500 salaries for December 20×1.
10. December 31, depreciation expense for equipment was $600.
11. December 31, owner withdrew $10,000 cash for personal use.












 

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