Completing the Accounting Cycle

This chapter will explain the steps required to complete the accounting cycle. This includes understanding the full accounting information cycle, and what is used to create the financial statements that will be provided to required and interested stakeholders. The accounting cycle happens every month for most companies, and requires distinct steps and cutoffs in order to create useful, consistent financial reports that managers can use to make decisions that improve the performance of the company. On a quartery and annual basis, financial statements are created for outside stakeholders as well.

Learning objectives

After studying this chapter, you should be able to:

  • Summarize the steps in the accounting cycle.
  • Prepare a work sheet for a service company.
  • Prepare an income statement, statement of retained earnings, and balance sheet using information contained in the work sheet.
  • Prepare adjusting and closing entries using information contained in the work sheet.
  • Prepare a post-closing trial balance.
  • Describe the evolution of accounting systems.
  • Prepare a classified balance sheet.
  • Analyze and use the financial results – the current ratio.

Source: Textbook Equity,
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