Preparation of Financial Statements

and
Completion of Accounting Cycle
 Financial Statement

• Formal records of the financial activities

and position of a business, person or
entity
• Worksheet is used for aid and
organization of this.
 Preparation of Financial Statements

• Involves process of aggregating

accounting information to a standardized
set of financials.
• Completed financial statements are then
distributed to lenders, creditors and
investors.
Financial Statements are Prepared in Following
Orders

1.Income Statement
2.Statement of Retained Earnings – also
called Statement of Owners’ Equity
3.The Balance Sheet
4.The Statement of Cash Flows
 Accounting Cycle

• A collective process of identifying,

analyzing and recording events of a
company.
 Completion of Accounting Cycle

• Series of steps starting with recording

business transactions and leading up to
preparation of financial statements.
• Culmination of these steps is the
preparation of financial statements.
 Steps in Accounting Cycle

1. Identify the events to be recorded.

2. Transactions are recorded in the journal.
3. Journal entries are posted to the ledger.
4. Preparation of a trial balance.
5. Preparation of the worksheet including
adjusting entries.
6. Preparation of financial statements.
7. Adjusting journal entries are journalized
and posted.
8. Closing journal entries are journalized
and posted.
9. Preparation of post-closing trial balance.
10.Reversing journal entries are journalized
and posted. (Optional)