Complete All Steps In The Accounting Cycle Principles of Cost Analysis and Management © Dale R Geiger 2011 Lacy’s Statement of Financial Position Assets: Liabilities & Financial Position: Cash $130 Other Assets 79 Total: $209 Liabilities: $ Financial Position: 206 Total: $209 Financial Position (-) (+) 200 © Dale R Geiger 2011 Why doesn’t the Ledger Account agree with the Statement of Financial Position? Terminal Learning Objective • Task: Complete All Steps In The Accounting Cycle For A Time Period • Condition: You are a cost advisor technician with access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors • Standard: with at least 80% accuracy: • Describe the purpose of closing transactions • Record closing transactions in tabular format © Dale R Geiger 2011 The Accounting Cycle Record Post-Closing Transactions Post to Trial Balance Ledger Close Accounts Prepare Trial Balance Prepare Statements Adjusted Trial Balance Adjust Accounts © Dale R Geiger 2011 Purpose of Closing Transactions • Zero out the Revenue and Expense accounts • Allows them to start the new period with a clean slate • Transfer revenue and expense information to the Financial Position account • Ending balance in Financial Position ledger account will agree with Statement of Financial Position © Dale R Geiger 2011 Zeroing the Accounts If I want to know how much rain falls in the next 24 hours, I must empty the rain gauge of all rain collected in the past © Dale R Geiger 2011 Transferring to Financial Position s e u n Reve E al i c n Fina ion t Posi s e s n xpe © Dale R Geiger 2011 Check on Learning • What are the two purposes for closing transactions? © Dale R Geiger 2011 Lacy’s Ledger Cash Other Assets (+) 200 15 50 (-) 20 10 65 40 -130 Financial Position (-) (+) 200 85 (+) 20 65 20 40 -79 Liabilities (-) 60 85 - Revenues (-) (-) 40 (+) 15 20 50 85 © Dale R Geiger 2011 (+) 40 Expenses (+) 10 60 79 (-) Lacy’s Ledger Cash Other Assets (+) 200 15 50 (-) 20 10 65 40 -130 Financial Position (-) 79 (+) 200 85 (+) 20 65 20 40 -79 Liabilities (-) 60 85 - Revenues (-) (-) 40 (+) 15 20 50 85 © Dale R Geiger 2011 (+) 40 Expenses (+) 10 60 79 (-) -79 10 Lacy’s Ledger Cash (+) 200 15 50 (-) 20 10 65 40 -130 Financial Position (-) 79 - (+) 200 85 -206 Other Assets (+) 20 65 20 40 -79 Liabilities (-) 60 85 - Revenues (-) (-) 40 (+) 15 20 50 85 © Dale R Geiger 2011 (+) 40 Expenses (+) 10 60 79 (-) -79 11 Recording Closing Transactions Transaction Description Balance Forward Close Revenues New Balance Close Expenses New Balance + Other = Assets 130 + 79 = Cash Liab + Financial + Position + 200 + © Dale R Geiger 2011 Rev – 85 - Exp 79 12 Recording Closing Transactions Transaction Description Balance Forward Close Revenues New Balance Close Expenses New Balance + Other Assets 130 + 79 + 130 + 79 + 130 + 79 Cash = = = = = = Liab + Financial + Position + 200 + + +85 + + 285 + + -79 + + 206 + © Dale R Geiger 2011 Rev – 85 -85 0 - Exp 79 79 -79 13 Recording Closing Transactions Transaction Description Balance Forward Close Revenues New Balance Close Expenses New Balance + Other Assets 130 + 79 + 130 + 79 + 130 + 79 Cash = = = = = = Liab + Financial + Position + 200 + + +85 + + 285 + + -79 + + 206 + 209 Rev – 85 -85 0 - Exp 79 79 -79 209 © Dale R Geiger 2011 14 Post-Closing Trial Balance • The post-closing or after-closing trial balance is a list of all of the accounts and their balances, omitting the accounts with a zero balance • Therefore, there will be no revenues or expenses on the post-closing trial balance, because the balance in each of those accounts is zero after the closing process © Dale R Geiger 2011 15 Lacy‘s Post-Closing Trial Balance Account Title dr cr $130    79     Liabilities   $  Financial Position   206  $209 $209   Cash  Other Assets Totals © Dale R Geiger 2011 16 Check on Learning • When the Expense account is closed, what is the effect on the Financial Position account? • What accounts should be included on the Post-Closing Trial Balance? © Dale R Geiger 2011 17 Accounting Cycle Spreadsheet Statement of Activity shows ending balance in Financial Position Lacy’s © Dale R Geiger 2011 18 Accounting Cycle Spreadsheet Total Assets equal Total Liabilities and Equity Lacy’s © Dale R Geiger 2011 19 Accounting Cycle Spreadsheet After Closing, the Revenue and Expense accounts have zero balances © Dale R Geiger 2011 20 Accounting Cycle Spreadsheet After Closing, the Financial Position balance agrees with the Statement of Activities © Dale R Geiger 2011 21 Accounting Cycle Spreadsheet The Post-closing Trial Balance includes only Assets, Liabilities and Financial Position © Dale R Geiger 2011 22 Practical Exercise © Dale R Geiger 2011 23 ... R Geiger 2011 Why doesn’t the Ledger Account agree with the Statement of Financial Position? Terminal Learning Objective • Task: Complete All Steps In The Accounting Cycle For A Time Period •... 2011 20 Accounting Cycle Spreadsheet After Closing, the Financial Position balance agrees with the Statement of Activities © Dale R Geiger 2011 21 Accounting Cycle Spreadsheet The Post-closing Trial... Post-Closing Trial Balance • The post-closing or after-closing trial balance is a list of all of the accounts and their balances, omitting the accounts with a zero balance • Therefore, there will