Elite Training Club

The accounting cycle consists of a series of steps or processes that businesses follow to record, analyze, and report their financial transactions. Here are one example each of the various steps in the accounting cycle:

1. Step 1: Analyzing Transactions
This is the initial step in the accounting cycle, where all financial transactions are reviewed and analyzed to determine their impact on the company's financial position. For example, if a company purchases inventory on credit, the transaction is analyzed to identify the increase in inventory and the corresponding increase in accounts payable.

2. Step 2: Journalizing
In this step, the analyzed transactions are recorded in the general journal. A journal entry is made for each transaction to document the specific accounts, amounts, and dates involved. For instance, in the previous example, the journal entry would detail the increase in inventory and the corresponding increase in accounts payable.

3. Step 3: Posting
After journalizing the transactions, the next step is to post the entries into the general ledger. The general ledger is a comprehensive record of all accounts maintained by the company. Each journal entry is posted to the respective accounts in the ledger. Following our example, the increase in inventory and accounts payable would be posted to their respective accounts.

4. Step 4: Trial Balance
At the end of an accounting period, a trial balance is prepared to ensure the equality of debits and credits. The trial balance lists all the accounts from the general ledger along with their debit or credit balances. This step helps in identifying any errors or discrepancies in the recording or posting of transactions.

5. Step 5: Adjusting Entries
Adjusting entries are made at the end of the accounting period to account for any accrued expenses, unearned revenues, prepaid expenses, or other adjustments required for accurate financial reporting. For example, if a company has earned but not received revenue, an adjusting entry would recognize the revenue and create a related accounts receivable.

6. Step 6: Financial Statements
After adjusting entries, the financial statements are prepared. The main statements prepared during the accounting cycle include the income statement, balance sheet, and cash flow statement. These statements provide a snapshot of the company's financial performance and position, summarizing revenue, expenses, assets, liabilities, and equity.

7. Step 7: Closing Entries
At the end of the accounting period, temporary accounts, such as revenue, expense, and dividend accounts, are closed. Closing entries transfer the balances of these accounts to the retained earnings account, resetting the temporary accounts for the next accounting period.

8. Step 8: Post-Closing Trial Balance
Finally, a post-closing trial balance is prepared to ensure that all temporary accounts have been properly closed and that the debits and credits are still in balance. This trial balance is created after closing entries have been made and only includes permanent accounts.

These are just examples of the steps involved in the accounting cycle, and the actual processes may vary depending on the specific accounting practices and systems used by different organizations.

✍🏻 What Level are you now ?

Based on the current international accounting standard(IAS), balance sheet is now known and called STATEMENT OF FINANCIAL POSITION.

STATEMENT OF FINANCIAL POSITION
Is that component of financial statements which shows the summary of all the assets and liabilities of a business organization.

SECTIONS OF A STATEMENT OF FINANCIAL POSITION
1. ASSETS: This is further divided into two namely:
a) Non-current assets, and
b) Current assets.

EXAMPLES OF NON-CURRENT ASSETS
1. Land and building
2. Plant and Machinery
3. Motor vehicles
4. Office machines
5. Furniture & fittings, etc
NOTE: The above are TANGIBLE ASSETS which can be seen physically.

INTANGIBLE ASSETS: Trademarks, patents, copyrights, goodwill, etc.

FICTITOUS ASSETS: promotional expenses, preliminary expenses, discount of sale of shares, etc.

CURRENT ASSETS:
These are assets that change their forms or values within 12 months in a business. Examples: inventories, receivables, cash balance in the bank, cash balance in the office, prepayment, etc....
LIABILITIES

This is the second section of a statement of financial position: There are two classes of liabilities namely:

CURRENT LIABILITIES
These are financial obligations that will fall due within 12 months. Examples: trade payables, bank overdraft, accrued expenses, tax liabilities, short term loans, etc.

NON-CURRENT LIABILITIES
These are fin. obligations that will fall due after 12 months. Examples: Debenture stocks, long term loans, Hire purchase creditors, etc.

EQUITY:
Equity is that capital of a business which forms a part of a liability section in a balance sheet.

EQUITY IN A LIMITED LIABILITY COMPANY
1. Ordinary shares
2. Preference shares
EQUITY IN SOLE PROPRIETORSHIP & PARTNERSHIP
It is called CAPITAL.

PURPOSE OF PREPARING A BALANCE SHEET
1. To know the financial position of a business entity
2. To know the networth of a business entity.

គំរូអំពីរបៀបនៃការគណនារកប្រាក់បំណាច់ប្រចាំថ្ងៃ ៧០% សម្រាប់សមាជិក ប.ស.ស. ជាស្ត្រីសម្រាលកូន។

✍🏻 Accounting Equation

ADVANCED EXCEL KEYBOARD SHORTCUTS

What is the rule of debit and credit?

Debit and credit are used to record financial transactions in double-entry bookkeeping. The rule to remember is called the "Chart of Accounts," which sets out the guidelines for recording transactions correctly. Here are the basic principles:

1. Debits (Dr) increase assets and expenses, and decrease liabilities, revenues, and equity.

2. Credits (Cr) increase liabilities, revenues, and equity, and decrease assets and expenses.

3. Each transaction must have at least one debit and one credit, ensuring that the accounting equation (assets = liabilities + equity) remains in balance.

4. The left side of an account is the debit side, and the right side is the credit side.

5. Debits are typically recorded before credits in ledger accounts.