ACCY111 Lecture Notes - Lecture 5: Capital Account, Trial Balance, Accounting Information System
Chapter 5 (Wk6) - Completing the accounting cycle:
1. Describe all the steps in the complete accounting cycle.
2. Explain why temporary ledger accounts need to be closed.
3. Explain how to record adjusting entries from the worksheet.
4. Describe the closing process, enter closing entries in accounting records and prepare a post-
closing trial balance.
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Document Summary
Income and expense accounts must be reduced to zero at the end of each period in order to determine the profit or loss for the period. Chapter 5 (wk6) - completing the accounting cycle: Account balances after the closing process: all income accounts have nil balances, all expense accounts have nil balances, the drawings account has a nil balance, the capital account has either: Increased by the profit or decreased by the loss: the capital balance is now updated. The post closing trial balance: prepared to verify equality of debits and credits, confirms that only permanent accounts have balances, starting point for next accounting period. Accrual entries in subsequent periods: adjusting entries are made at the end of accounting period to record accruals. Expenses- not yet paid or received: cash received or paid in subsequent periods for accruals must be analyses to correctly apportion amount between the two periods.
