The Accounting Cycle

&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad1" id&equals;"quads-ad1" style&equals;"float&colon;left&semi;margin&colon;0px 0px 0px 0&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;<h3>5&period; Preparing a trial balance<&sol;h3>&NewLine;<p align&equals;"justify">A trial balance proves and authenticates the equality of debit and credit entries in the ledger&period; The purpose of this procedure is to verify the accuracy of posting process and the computation of the ledger account balances&period; In the nut shell debit and credits sides are balanced at the end in the trial balance&period;<&sol;p>&NewLine;<h3>6&period;Adjusting entries<&sol;h3>&NewLine;<p align&equals;"justify">Prepare the adjusting entries to record inventory&comma;deferred&comma; accrued and estimated accounts&period;<&sol;p>&NewLine;<h3>7&period;Post adjusting entries<&sol;h3>&NewLine;<p align&equals;"justify">Post adjusting entries to ledger to develop adjusted trial balance&period;<&sol;p>&NewLine;<h3>8&period;Preparation of financial statements<&sol;h3>&NewLine;<p align&equals;"justify">The final step of accounting cycle is to extract figures from trial balance which are then summarized up to prepare the financial statements&period; These financial statements demonstrate the position of the business at the specific date i&period;e&period; Balance sheet or the position of business for specific period<&sol;p>&NewLine;<p align&equals;"justify"><strong>For Example&comma;<&sol;strong><&sol;p>&NewLine;<p align&equals;"justify">Income statement&period; The preparation of financial statements concludes the effects of business transactions occurring through the date of the statements and completes the accounting cycle&period;<&sol;p>&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad2" id&equals;"quads-ad2" style&equals;"float&colon;none&semi;margin&colon;0px 0 0px 0&semi;text-align&colon;center&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;&NewLine;<p align&equals;"justify">Balance Sheet&period; This statement include assets &lpar;current assets and fixed assets&rpar;&comma; liabilities &lpar;short term liabilities and long term liabilities&rpar; and equity accounts&period; These accounts are used to develop the balance sheet of the company&period;<&sol;p>&NewLine;<p align&equals;"justify">Statement of retained earning&period; This statement is developed from income statement and dividend information&period;<&sol;p>&NewLine;<p align&equals;"justify">Cash flow Statement&period; Cash flow statement developed from other financial statement using direct or indirect method&period;<&sol;p>&NewLine;<h3>9&period;Prepare closing journal entries<&sol;h3>&NewLine;<p align&equals;"justify">Prepare the closing journal entries to close the temporary account include gain&comma; revenues&comma; expense and losses&period;&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad3" id&equals;"quads-ad3" style&equals;"float&colon;none&semi;margin&colon;0px&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;&NewLine;