Question: 1: What are the steps in completing the accounting cycle?
2: The steps in completing the accounting cycle is to analyze business transactions and prepare a general journal. T accounts/T forms are used to analyze financial events, by classification, affects based on the application of debit or credit rules. The record of business transactions is used for entering all of the T account specifics in chronological order. The journal entries are assigned document numbers for auditing purposes.
3: I noticed that the journal are numbered and line space is separated for each transaction and date, but, ledger has no space in between the lines. But, there should be no difference where the debit should go and where the credit should go. What's on the journal should be on the ledger. The journal is like a diary, the ledge is the novel (finished product). And, the auditors proof read it all. finally getting used to the debits and credits. but then on the practice test they through me a curve. The example was if the product you sent to the client gets lost and you have to reimburse the client. To give back the money to the client fee income is debit and cash is credit?
4: The revenue recognition period states that revenues be shown on the income statement in the period in which they are earned, not in the period that the cash is collected. This way you will have a record of the credit on the account before you collect the cash.
The expense recognition principle states that expenses should be recorded during the period in which they are incurred, regardless of when the transfer of cash occurs. So that you can have it on record before you collect the cash. A separate entry would be made when you collect the cash.