Statement of Financial Position DB

Running Head : Accounting cycle

Accounting cycle

[The name of the writer appears here]

[The name of the institution appears here]

Accounting cycle

We have selected WAL MART as a company to analyze the accounting cycle WAL MART is the famous departmental store that has operations in many countries

The main purpose of the company is to sell variety of goods to public It is assumed that the entire sale is cash sale

The preparation of financial statement includes various steps which is called as accounting cycle

Following are

the steps of the accounting cycle

Occurrence of an event

It means that an event (Shukla 2005 ) occur which needs to be recorded in the accounts

Example : cash sales in a departmental store (Wal-Mart ) of 2000 must be recorded in the proper accounting books

Journal entries of transaction

After the event had happened there should be a journal entry in the general journal for that event or transaction

Cash (debit 2000

Sales (credit 2000

Posting to the general ledger

The general ledger contains accounts for every item and from the general journal the entries are posted to the general ledger accounts respectively

Sales entries and cash collected are posted in sales and cash account

Trial balance

At the end of the period all the accounts in the general ledger are closed and the amounts of the accounts are collected in the trial balance . The debit and credit should be equal to each other

Example debit credit

Sales 2000

Cash 2000 Adjustments

After the period end there may be some adjustments which should be accounted for

Example

Sales return of 500

Sales (debit 500

Cash (credit 500

Adjusted trial balance

After the entries of the adjustments the adjusted trial balance should be prepared

Debit credit

Sales 1500

Cash 1500

Prepare financial statements

Financial statements are prepared using the balances from the adjusted trial balance

Closing the accounts

To prepare the financial statements all the accounts should be closed and closing entries will be passed

Example

sales (debit 1500

Trading

/l account (credit 1500

Balance sheet (debit 1500

Cash (credit 1500

All the balances are carried forward to the next period

The above steps should be repeated in every period

References

Shukla ,Grewal (2005 . Advance accounting : accounting cycle Jaipur : India

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