Financial Accounting

GROUP MEMBERS:
RIJA SHAKOOR (9649)
LAIBA SHAMIM (9666)
AHMED NAZEER (9770)
RIMSHA LIAQUAT (9859)
NOOR UL AIN (9471)

Instructor: Sir Abdul Mateen

AccountingCycle:
An Accounting Cycle is the collective process of identifying, analyzing,
and recording the accounting events of a company. The series of steps
begins when a transaction occurs and end with its inclusion in the
financial statements.

Purpose:
The purpose of Accounting Cycle is to accumulate and report on
financial information about the performance, financial position, and
cash flows of a business. The information is then used to reach
decisions about how to manage the business, or invest in it, or lend
money to it.

Example:
General Journal:
The General Journal is where double entry book keeping entries are
recorded by debiting one or more accounts and crediting another one
or more accounts with the same total amount.

Purpose:
A General Journal is a record of financial transactions in order by date.
A general journal is also named the book of original entry, from when
transactions were written in a journal prior to manually posting them to
the accounts in the general ledger or subsidiary ledger.

Example:
General Ledger:
The General Ledger is the primary accounting record of a company that
uses double-entry book keeping. It is divided into two sections:
debit and credit. It is also known as T.Accounts.

Purpose:
The purpose of General ledger is to provides a complete record of
financial transactions over the life of the company. The ledger holds
account information that is needed to prepare financial statements and
includes accounts for assets, liabilities, owner’s equity, revenues and
expenses.

Example:
TrialBalance:
A listing of the accounts in the general ledger along with each
account’s Balance in the appropriate debit or credit column. The total
of the amounts in the debit column should equal the total of the
amounts in the credit column.

Purpose:
The purpose of Trial Balance is to prove that the value of all the debit
value balances equal to the total of all the credit values balances. If the
total of debit column does not equal to the total value of credit column
then this would show that there is an error in the nominal ledger
accounts.

Example:
Adjusting Entries:
Adjusting Entries usually dated the last day of the accounting period to
bring the balance sheet and income statement up to date on the
accrual basis of accounting.

Purpose:
The main purpose of Adjusting Entries is to update the accounts to
confirm with the accrual concept. At the end of the accounting period,
some income and expenses may have not been recorded, taken up or
updates; hence, there is a need to update the accounts.

Transaction:
In start we have a supply of $2080, Supplies on hand at may 31st $750.

Adjusting Journal Entry

Date Particular Debit Credit
May 31st Supplies Expense 1330

Supplies 1330
Adjusted Trial Balance:
An Adjusted Trial Balance is prepared after adjusting entries are made
and posted to the ledger. This is the second trial balance prepared in
the accounting cycle.

Purpose:
The Adjusted Trial Balance is an internal document and is not a
financial statement. The purpose of the adjusted trial balance is to be
certain that the total amount of debit balances in the general ledger
equals the total amount of credit balances.

Example:
Income Statement:
The Income Statement is one of a company’s core financial statements
that shows their profit and loss over a period of time. The profit or loss
is determined by taking all revenues and subtracting all expenses from
both operating and non-operating activities.

Purpose:
The purpose of the Income Statement is to show the reader how much
profit or loss an organization generated during a reporting period. The
other key subtotal is the operating profit, which is the gross profit
minus all operating expenses.

Example:
Balance Sheet:
A Balance Sheet allows businesses to see their assets, in one column at
the left side and liabilities, owner's equity in other column at the right
side for a specific point in time and both columns are balanced.

Purpose:
The Balance Sheet is a snapshot at a single point in time of the
company’s accounts- converting its assets, liabilities and shareholders’
equity. The purpose of the balance sheet is to give users and idea of the
company’s financial position along with displaying what the company
owns and owes.
Example:
Statement of Retained Earnings:
The Statement of Retained Earnings shows the relationship between a
company's income statement and balance sheet from one point to
another.

Purpose:
The purpose of Retained Earnings is the profit generated by a company
that are not distributed to stockholders as dividends but are either
reinvested in the business or kept as a reserve for specific object such
as to pay off a debt or purchase a capital asset.

Example:
Closing Entries:
A Closing Entry is a journal entry made at the end of an accounting
period to transfer the temporary account balances to the permanent
accounts.

Purpose:
The purpose of the Closing Entry is to bring the temporary account
balances zero on the general ledger, including revenue, expense and
dividends accounts. All income statement balances are eventually
transferred to retained earnings.

Example:
Post-Closing Trial Balance:
A listing of all of the accounts in the general ledger with account
balances after the Closing Entries have been Posted. 

Purpose:
The purpose of the Post Closing Trial Balance is just that. It ensures
that at the end of an accounting period, the sum of the total debits is
equal to the sum of the total credits.

Example: