3

Accounting Cycle

CHAPTER OBJECTIVES

This chapter will help the readers to:

  • Understand the accounting process leading to the preparation of the profit and loss account, and the balance sheet.
  • Differentiate between real accounts, personal accounts and nominal accounts.
  • Apply the rules for debiting or crediting different types of accounts.
  • Understand the process of ledger posting, balancing of accounts and preparation of trial balance.
  • Prepare the profit and loss account, and the balance sheet from a given trial balance and year-end adjustment entries.
3.1 INTRODUCTION

Financial statements—the profit and loss account and the balance sheet—convey useful information about the financial health of a business enterprise. Every manager is expected ...

Get Financial Accounting for Managers, 3rd Edition now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.