accounting cycle

father of modern accounting *bonus question

Luca pacioli

accounting cycle

how info gets generated into an organization through a transaction

organizes financial records

Income statement

beginning of accounting cycle

determines net income

net. income = revenue - expenses

statement of owners equity

updates owners capital balnce

links profitability to changes in ownership value

ending equity = beginning equity + investments + net income - withdrawals

Balance sheet

present the financial position using the updated capital

shows liquidity solvency and financial stability

asset = liabilties + owners equity

cash flow statement (only not accrual statement)

a report on the cash moving in and out of a business

how different sources of cash contribute to and are used by company

income —> statement of owners equity

net income gets added into equity

statement of owners equity —> balance sheet

equity closing balance = retained earnings under equity in balance sheet

balance sheet —> statement of cash flows

beginning/ending cash used in cash flow statements

income statement —> statement of cash flows

adjusts net income for non cash and working capital changes

permanent accounts

remain open

assets, liabilitys, owners equity

temperary accounts

close and restore back to 0 when accounting period over

revenues, expenses

T - accounts

used to represent an account and all transactions in a period

to visually track and organize all debits (left side) and credits (right side) for a specific financial account

ledger accounts

look at a transaction and organize to find balance