The Accounting Cycle

TheAccountingCycle
LarryM.Walther;ChristopherJ.Skousen

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The Account ing Cycle

© 2009 Larry M. Walt her, under nonexclusive license t o Christ opher J. Skousen &
Vent us Publishing ApS. All m at erial in t his publicat ion is copyright ed, and t he exclusive
propert y of Larry M. Walt her or his licensors ( all right s reserved) .

I SBN 978- 87- 7681- 486- 1

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Contents

The Accounting Cycle

Cont ent s
Part 1: Welcome to the World of Accounting

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1.
1.1
1.2
1.3

1.4
1.5

Accounting Information
Accounting Def ned
Financial Accounting
Managerial Accounting
A Quality Information System
Inherent Limitations

2.
2.1

The Accounting Profession and Careers
Accounting and Professional Ethics

3.
3.1
3.2
3.3
3.4

The Fundamental Accounting Equation
Assets
Liabilities
Owners’ Equity
Balance Sheet

4.
4.1

4.2
4.3
4.4
4.5
4.6

How Transactions Impact the Accounting Equation
Edelweiss Collects an Account Receivable
Edelweiss Buys Equipment With Loan Proceeds
Edelweiss Provides Services to a Costumer on Account
Edelweiss Pays Expenses With Cash
Generalizing About the Impact of Transactions
Distinguishing Between Revenue and Income

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Contents

The Accounting Cycle

5.
5.1
5.2
5.3
5.4
5.5
5.6
5.7

The Core Financial Statements
Financial Statements
Income Statements
The Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows
Articulation
Unlocking the Mystery of Articulation

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Part 2: Information Processing

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6.
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9

Accounts, Debits and Credits
Accounts
Debits and Credits
The Fallacy of “+/-” Nomenclature
The Debit/Credit Rules
Assets/Expenses/Dividends
Liabilities/Revenues/Equity
Analysis of Transactions and Events
Determining an Account’s Balance
A Common Misunderstanding About Credits

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7.
7.1
7.2
7.3
7.4

The Journal
Illustrating the Accounting Journal
Special Journals
Page Numbering
But, What are the Account Balances?

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360°
thinking

.

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© Deloitte & Touche LLP and affiliated entities.

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