THE ACCOUNTING CYCLE
In Chapter 3, we briefly described the accounting cycle in a general sense as the process
that begins with analyzing transactions, adjusts the accounting records, prepares
financial statements, and ends with preparing the accounting records for the next
period. In this section, we expand our discussion to include features of the double-
entry accounting system. These features include the journal, ledger, unadjusted trial
balance, adjusted trial balance, closing entries, and post-closing trial balance.
The basic steps of the accounting cycle for the double-entry accounting system are
listed below. The accounting cycle begins with transactions that are supported by
source documents and ends with the post-closing trial balance. We completed each of
these steps for Online Solutions in this chapter.1.Transactions are analyzed from source documents and are recorded in the journal
using the rules of debit and credit.
2.Transactions recorded in the journal are posted to the ledger accounts.
3.An unadjusted trial balance is prepared.
4.Adjustment data are assembled and analyzed.
5.Adjusting entries are prepared and recorded in the journal.
6.Adjusting entries recorded in the journal are posted to the ledger accounts.172 Chapter 4 Accounting Information Systems
Describe the accounting
cycle for the double-entry
accounting system.5
Online Solutions
Post-Closing Trial Balance
December 31, 2007Debit Credit
Balances Balances
Cash 2,065
Accounts Receivable 2,720
Supplies 760
Prepaid Insurance 2,300
Office Equipment 1,800
Accumulated Depreciation 50
Land 20,000
Accounts Payable 900
Wages Payable 250
Unearned Rent 240
Capital Stock 25,000
Retained Earnings 3,205
Dividends 0
Fees Earned 0
Rent Revenue 0
Wages Expense 0
Supplies Expense 0
Rent Expense 0
Utilities Expense 0
Insurance Expense 0
Depreciation Expense 0
Miscellaneous Expense 0
29,645 29,645Exhibit 16
Post-Closing Trial
Balance for Online
Solutions