Professional Documents
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Accounting Principles
Completing the accounting cycle
Learning objectives
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It zeroes out all the revenues and all the expenses in order to
measure each periods profit separately from all other periods
and updates the Capital account balance
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Temporary accounts
Permanent accounts
Step 1: Make the revenue accounts equal zero via the Income
summary account
Step 3: Make the Income summary account equal zero via the
Capital account
Step 4: Make the Drawings account equal zero via the Capital
account
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This optional step lists the accounts and their adjusted balances
after closing
Only assets, liabilities and capital accounts appear on the postclosing trial balance
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Assets
The operating cycle is the time span during which (1) cash is
used to acquire goods and services, and (2) these goods and
services are sold to customers, from whom (3) the business
collects cash
Liabilities
Current liabilities are debts that are due to be paid with cash or
with goods and services within one year, or within the business
operating cycle if longer than a year
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Summary: