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06 Completing The Accounting Cycle

This document provides an overview of accounting fundamentals including the accounting cycle and preparing financial statements. It discusses what accounting is, the objectives of the module, how to prepare a worksheet including adjusting entries and financial statements. It also covers closing the books through closing entries and preparing a post-closing trial balance. Examples are provided for preparing a worksheet and adjusted trial balance.

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Kristel Joy Eledia Nietes
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96 views26 pages

06 Completing The Accounting Cycle

This document provides an overview of accounting fundamentals including the accounting cycle and preparing financial statements. It discusses what accounting is, the objectives of the module, how to prepare a worksheet including adjusting entries and financial statements. It also covers closing the books through closing entries and preparing a post-closing trial balance. Examples are provided for preparing a worksheet and adjusted trial balance.

Uploaded by

Kristel Joy Eledia Nietes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

San Juan Campus

Fundamentals
of Accounting
Part 1
Ernie Masilang Lat II, CPA,
REB, EnP, MABE
PUP OUS IODE
Overview
PUP OUS IODE
Overview
What is Accounting?
Accounting is a service activity. Its function
is to provide quantitative information,
primarily financial in nature, about economic
activities that is intended to be useful in
making economic decisions.
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Objectives
After successful completion of this module, you should be able to:
• Prepare a worksheet.
• Prepare closing entries and a post-closing trial balance.
• Explain the steps in the accounting cycle and how to prepare
correcting entries.
• Identify the sections of a classified balance sheet.
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The Worksheet
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The Worksheet
A worksheet is a multiple-column form used in the adjustment
process and in preparing financial statements. As its name
suggests, the worksheet is a working tool. It is not a permanent
accounting record. It is neither a journal nor a part of the
general ledger. The worksheet is merely a device used in
preparing adjusting entries and the financial statements.
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Steps in
Preparing a
Worksheet
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Step 1
Prepare a
Trial
Balance on
the
Worksheet
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Step 2
Enter the
Adjustme
nts in
the
Adjustme
nts
Columns
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Step 3
Enter
Adjusted
Balances
in the
Adjusted
Trial
Balance
Columns
Step 4
PUP OUS IODE Extend
Adjusted
Trial
Balance
Amounts
to
Appropri
ate
Financial
Statemen
t
Columns
Step 5
Total the
PUP OUS IODE Statemen
t
Columns,
Compute
the Net
Income
(or Net
Loss),
and
Complete
the
Workshee
t
Preparing
PUP OUS IODE Financial Statements
from a Worksheet
Preparing
PUP OUS IODE Financial Statements
from a Worksheet
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Closing the Books
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Closing the Books
Temporary accounts relate only to a given accounting period.
They include all income statement accounts and the owner’s
drawings account. The company closes all temporary accounts
at the end of the period.
In contrast, permanent accounts relate to one or more future
accounting periods. They consist of all balance sheet accounts,
including the owner’s capital account. Permanent accounts are
not closed from period to period. Instead, the company carries
forward the balances of permanent accounts into the next
accounting period.
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Closing the Books
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Preparing Closing Entries
Closing entries formally recognize in the ledger the transfer of
net income (or net loss) and owner’s drawings to owner’s capital.
The owner’s equity statement shows the results of these entries.
Closing entries also produce a zero balance in each temporary
account. The temporary accounts are then ready to accumulate
data in the next accounting period separate from the data of
prior periods. Permanent accounts are not closed.
Companies record closing entries in the general journal. A center
caption, Closing Entries, inserted in the journal between the last
adjusting entry and the first closing entry, identifies these
entries. Then the company posts the closing entries to the ledger
accounts.
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Preparing Closing Entries
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Preparing Closing Entries
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Posting Closing Entries
PUP OUS IODE a Post-Closing Trial Balance
Preparing
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Assessment
At the end of its first month of operations, Pampered Pet Service
has the following unadjusted trial balance. Prepare worksheet.
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Assessment
Ming Company was organized on April 1, 2020. The company
prepares quarterly financial statements. The adjusted trial
balance amounts at June 30 are as follows.
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Questions?
For questions and clarifications, please email me at
[email protected]. If I do not respond after three
(3) days after the email, kindly perform a follow up
email. Thank you!
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END

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