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Chapter 6
The Accounting Cycle: Statements and Closing Entries
Preparing the Financial Statements
At this point in the accounting cycle, day-to-day journal entries have been made, adjustments have been
recorded, all transactions have been posted to the general ledger and the adjusted trial balance has been
completed. It is now time to complete the final three steps of the accounting cycle, beginning with the
preparation of financial statements.Recall the first three steps of the accounting cycle are repeated many
times during the period, while the remaining six steps are only completed at the end of the period.
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Step 7
Step 8
Step 9
ACCOUNTING
CYCLE
Analyze
transactions
Journalize the
transactions
Post to ledger
accounts
Prepare the trial
balance
Journalize and
post adjusting
entries
Prepare the
adjusted trial
balance
Prepare the
financial
statements
Journalize and post
closing entries
Prepare the post-
closing trial balance
________________
Figure 6.1
learning outcomes
1
Prepare financial statements using the adjusted
trial balance
2
Prepare closing journal entries and post them to
the general ledger
3
Prepare the post-closing trial balance to complete
the accounting cycle
4
Distinguish between current and long-term assets
and liabilities
5
Prepare the classified balance sheet
6
Calculate working capital, the current ratio and
the quick ratio
7
Describe the benefits of a computerized
accounting system over a manual system
Appendix
8
Prepare a 10-column worksheet
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