Completing the Accounting Cycle

Read and take notes on sections 5.1-5.11 on pages 190-231.

  • Section 5.3 summarizes what we've learned so far and introduces the accounting worksheet. 
  • Section 5.4 discusses the accounting worksheet step-by-step using the example of the MicroTrain company.
  • Section 5.5 shows a worksheet that you can use to create your financial statements. 
  • Section 5.6 explains how the accounting worksheet can be your source for making the adjusting entries. The worksheet is an informal document that supports the analysis of the accounting information; it is not a part of the formal accounting process. Some people prefer to use the worksheet, and you should learn the basics of it. As you become more comfortable, you can decide whether or not to use it. 
  • Section 5.7 discusses the nominal account, which describes a temporary account. When you take your snapshot of a specific accounting period, you need to address the nominal accounts.
  • Section 5.8 analyzes how technology has affected financial accounting.
  • Section 5.9 compares balance sheets and classified balance sheets.
  • Section 5.10 discusses and the current ratio, which is a firm's ability to pay off its current liabilities with its current assets. A basic standard suggests that a business should maintain a 2-to-1 ratio to meet its financial obligations. However, there are many variables that determine what is best in a given situation.
  • Section 5.11 summarizes the chapter and offers a self-test. The solutions to the self-test are on pages 250 and 251.
Click AccountingPrinciples.pdf link to view the file.