“The Creative Chaos”

“Osama, Abdus Samad, Zaheer Ahmed, Danyal & Kamran”

THE ACCOUNTING

CYCLE

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

          

Analyze Journalize Transactions

General Ledger

• Choronological Order

• T-Accounts

• Posting

Unadjusted Trial Balance

• Preparation of Trial Balance.

• Entries either Monthly/Quarterly.

Adjusting Entries

• Entries are recorded, when they are actually occurred

• Balance Day Adjustments

Adjusting Entries

• Types of Adjusting Entries

I. Converting Assets to Expense

II. Converting Liabilties to Revenue

III. Accruing unpaid Expenses

IV. Accruing Uncollected Revenue

Adjusted Trial Balance

• Preparation of unjusted trial balance with the emergence of adusting enteries.

• Internationally Accepted Standards.

• Financial Statements.

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.

Closing Entries

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

Income Statement

• Financial Tool

• Inflows & outflows of revenues &

expenses

• Revenues.

• Expenses.

EQUATION:

Revenues

Expenses– =

Net income

OrNet loss

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

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

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

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

Shareholders’ Equity

• Owner`s Equity

• Retained Earnings

The Cash Flow Statement

• It contains three activities.

I. Operating activities.

II. Financial activities.

III. Investing activities.

THE END