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Respond to the following in a minimum of 175 words: We will continue our study this week of the accounting cycle for a service based company. Keep in mind the steps in the accounting cycle as we work
Respond to the following in a minimum of 175 words:
We will continue our study this week of the accounting cycle for a service based company. Keep in mind the steps in the accounting cycle as we work through each week:
- Analyze business transactions
- Journalize the transactions
- Post journal entries to general ledger accounts
- Prepare a Worksheet
- 4a Prepare a Trial Balance in the Worksheet
- 4b Record Adjusting Entries in the Worksheet
- 4c Prepare Adjusted Trial Balance in the Worksheet
- 4d Complete and Balance the Balance Sheet and Income Statement columns in the Worksheet
5. Prepare the Four Basic Financial Statements (Income Statement, Owners Equity, Balance Sheet and Cash Flow) using data from the Worksheet
6. Record the adjusting entries in the General Journal and post to Ledger Accounts.
7. Record Closing Entries in General Journal and post to Ledger Accounts
8. Prepare Post-closing Trial Balance
9. Review the Financial Statements and Interpret the financial information
Last week we journalized transactions and posted the entries to the general ledger accounts (Steps 2 and 3 in the accounting cycle.) This week, we will study Steps 4, 5 and 6. Now, this may sound like a lot of steps to cover in one week, but don't be intimidated. A Worksheet is a tool we will use this week that helps us complete Steps 4-6 easily and in a logical and organized manner.
Every time a company prepares financial statements, adjusting entries are required. Generally, financial statements are prepared at the end of each month, the end of each quarter and at the end of each year.
Each adjusting entry affects a balance sheet account and an income statement account. For example, Adjusting Entries for Prepaid Assets or Fixed Assets involve decreasing the asset account and increasing the expense account. Adjusting entries are made in order properly follow GAAP.
Based on your review of Section 1 of Chapter 5, describe an adjusting journal entry that is needed at the end of an accounting period. Why are adjusting entries important and how do they contribute to accurate financial reporting?
Accrual accounting is required under U.S. GAAP. One of the main principles of accrual accounting is the Matching Principle, also known as the Revenue Recognition Principle and the Expense Recognition Principle. Consult a reliable resource online and in your own words, explain the difference between accrual basis accounting and cash basis accounting. How does this relate to the Matching Principle?
