“The Creative Chaos”. THE ACCOUNTING CYCLE Analyze Journalize Transactions To Record....
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Transcript of “The Creative Chaos”. THE ACCOUNTING CYCLE Analyze Journalize Transactions To Record....
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“The Creative Chaos”
“Osama, Abdus Samad, Zaheer Ahmed, Danyal & Kamran”
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THE ACCOUNTING
CYCLE
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Analyze Journalize Transactions
• To Record.• Debit/Credit
S.no Particulars P/R Debit Credit
1 XXX xxx
2 XXX xxx
3 XXX xxx
4 XXX xxx
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Analyze Journalize Transactions
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General Ledger
• Choronological Order
• T-Accounts
• Posting
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Unadjusted Trial Balance
• Preparation of Trial Balance.
• Entries either Monthly/Quarterly.
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Adjusting Entries
• Entries are recorded, when they are actually occurred
• Balance Day Adjustments
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Adjusting Entries
• Types of Adjusting Entries
I. Converting Assets to Expense
II. Converting Liabilties to Revenue
III. Accruing unpaid Expenses
IV. Accruing Uncollected Revenue
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Adjusted Trial Balance
• Preparation of unjusted trial balance with the emergence of adusting enteries.
• Internationally Accepted Standards.
• Financial Statements.
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Closing Entries
• Temporary Accounts
• Sequence of Closing Entries
• Close the revenue accounts to Income Summary.
• Close the expense accounts to Income Summary.
• Close Income Summary to Retained Earnings.
• Close Dividends to Retained Earnings.
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Closing Entries
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Financial Statements
.Income StatementIncome Statement
Retained EarningsRetained Earnings
Balance Sheet Balance Sheet
Cash Flow StatementCash Flow Statement
Prepare financial statementsPrepare financial statementsIncome StatementIncome Statement
Retained EarningsRetained Earnings
Balance Sheet Balance Sheet
Cash Flow StatementCash Flow Statement
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Income Statement
• Financial Tool
• Inflows & outflows of revenues &
expenses
• Revenues.
• Expenses.
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EQUATION:
Revenues
Expenses– =
Net income
OrNet loss
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Retained Earnings
• It basically derived from “Net income by subtracting dividends” .
LesssNet Income
Net Income
LessLess DividendsDividends == Retained Earnings
Retained Earnings
Retained Earnings at beg.
Retained Earnings at beg.
Add. Net Income
Subt. Dividends
Add. Net Income
Subt. Dividends
Retained Earnings
At end
Retained Earnings
At end
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Balance Sheet
• Reports the financial condition of a company at a specific point in time
• Required to report every three months• Three key areas:
– Assets (What it owns)
– Liabilities (What it owes)
– Shareholders’ equity
• Assets = Liabilities + Shareholders’ Equity
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Assets
• Current Assets– Can be turned into cash quickly (within 12 months)
Examples.• Cash, investments
• Accounts Receivable (Bills due to the company)
• Fixed Assets– Also long-term assets, property, plant, and equipment
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Liabilities
Current Liabilities
Cash the company must pay in the next 12 months
Examples
Accounts Payable (Bills the company owes)
Accrued wages, interest, and other expense
Long-term Liabilities
Debt due in the years ahead vs. the current year
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Shareholders’ Equity
• Owner`s Equity
• Retained Earnings
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The Cash Flow Statement
• It contains three activities.
I. Operating activities.
II. Financial activities.
III. Investing activities.
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THE END