Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

OVERVIEW

During the accounting period, transactions are recorded daily in the journal. At convenient times, information is posted from the journal to the ledger. At the end of the accounting period, the accountant summarizes the effects of the many recorded transactions, adjusts the accounts, and prepares financial statements. To help organize the information, the accountant uses an organized piece of scratch paper called a worksheet. The worksheet is a simple tool and is an optional step in the accounting cycle. Its preparation and uses are discussed in this chapter. After financial statements are drafted, the nominal (or temporary) accounts must be prepared for the accumulation of data pertaining to transactions in the following accounting period. Closing entries are journalized and posted to do just that; they are a required step in the accounting cycle and are discussed in this chapter. At the beginning of the subsequent (new) accounting period, reversing entries may be prepared in order to facilitate the recording of cash receipts and disbursements that relate to adjusting entries of the prior period. Reversing entries are an optional step in the accounting cycle and are discussed in the appendix to this chapter.