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5 Steps of the Accounting Cycle
Terms in this set (5)
View source documents that describe business transactions.
Determine which accounts are affected by this transaction.
Ex: Checks , Invoices , and Bank Statements.
Applies the rules of double-entry accounting
*Each transaction affects at least two accounts.
Debit on the Left / Credit on the right.
*Record transactions in a journal
All journal entries are posted in a ledger by an account.
*Accounts show a running balance of each account
Prepare a Trial Balance
Lists all accounts and their balances.
*These balances are used to create the financial statements
Prepare Financial Statments
Use the account balances to create financial statements
*Financial statements must be created in certain order
Income Statement first
Balance sheet last
Net income from Income Statement goes into Capital account on Balance Sheet
THIS SET IS OFTEN IN FOLDERS WITH...
Financial Accounting - Ch. 7
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