MUHASEBE I - Deneme Sınavı - 2

Service Revenue account is debited with the same amount of its credit balance and Income Summary account is credited. By doing so, BB Company closes its revenue account and transfers the balance to Income Summary account.

Classified balance sheet reports each asset, liability and owner’s equity in specific sections.

Income statement is the financial statement that reports operation results of a business for a specific period of time (month, quarter quarter, or year year).

Current liabilities, non current liabilities, owner's equity

Profit/loss = revenues + expenses. This means 1.000.000 - 450.000 = 550.000

After closing of revenue accounts,expense accounts and Income Summary account, it is timeto prepare post-closing trial balance as the ending step in the accounting cycle.

Accounting cycle can be defined as the process by which companies produce their financial statements for a specific period of time.

Opening entries based on opening balance sheet is the first step of the accounting circle.

Preparing post-closing trial balance is the last step of the accounting cycle.

At the end of each month, monthly trial balance is prepared in order to ensure that the totals and the balances of the accounts are equal.

Current assets include the assets that will be converted into cash, sold, consumed or received within 12 months or within the business’s operating cycle, and the cash and cash equivalents. Here are some examples for current assets: cash and cash equivalents, accounts receivables, merchandise inventory, prepaid expenses, supplies, marketable securities, etc.

Preparing adjusted trial balance follows adjusting entries

For the preparation of financial statements, the starting point is the adjusted trial balance. As you can remember from the previous chapters, adjusted trial balance is one form of trial balance that holds in-term transactions’ totals and balances as well as the end of the period transactions’ totals and balances for final checking of the accounts and preparation of financial statements. After the preparation of adjusted trial balance and financial statements, closing entries will be recorded in order to get accounts ready for the next year. We will focus on closing process further in this chapter. Now, let’s have a look at the financial statements. Financial statements are prepared in order;

Income Statement shows the profit or loss of the company. So, how does profit or loss occur?
The positive difference between revenues and expenses give profit whereas the negative difference gives the loss. So, in the income statement company reports revenues, expenses
and their differences.

Non-current assets include the assets acquired to be used in business ‘s operations for more than 12 months and receivables of which due dates are more than 12 months and examples of non-current assets include investments in other companies, intellectual property (e.g. patents), and property, plant and equipment.

As the end of the period comes, adjusting entries are made to ensure the assets, liabilities and owner’s equity. After the adjustment transactions, adjusted trial balance is prepared, and financial statements are prepared afterwards. After the preparation of financial statements, the company journalizes and posts the closing entries. The final step of the accounting cycle is preparing the post-closing trial balance. Now, let’s summarize the steps in accounting cycles briefly: