Commercial Applications
What is accounting cycle?
GAAP
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Answer
Accounting cycle refers to a complete sequence of accounting activities. It begins with the recording of financial transactions and ends with the preparation of the Balance Sheet. The accounting cycle consists of the following stages: (i) recording financial transactions in the journal (journalising), (ii) posting entries in the ledger, (iii) preparing the trial balance, (iv) preparing the income statement (Trading and Profit & Loss Account), (v) preparing the Balance Sheet, and (vi) opening new books in the next year by transferring the balances of assets and liabilities. The same process is repeated year after year, making accounting cycle an ongoing process.
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Related Questions
With reference to the Dual Aspect Principle identify the correct option:
- Assets = Capital - Liabilities
- Liabilities = Assets + Capital
- Capital = Assets + Liabilities
- Capital = Assets - Liabilities
Which accounting principle specifies that business will exist for an indefinite period of time?
- The Money measurement principle
- The Business entity principle
- The Dual aspect principle
- The Going concern principle
What is business entity concept of accounting?
"Firms live forever." Explain with reference to the concept of accounting.