Type: Process Essays
Sample donated: Archie Copeland
Last updated: October 18, 2019
Grey Hound Transportation Name: Course: Institution: Lecturer: Date: Grey Hound Transportation Financial Accounting Cycle The financial accounting cycle is an accounting process where all the business transactions are recorded and posted in the relevant accounts for the achievement of useful financial information. The final financial information is obtained from the four main financial statements comprising of the income statement, balance sheet, cash flow statement and statement of shareholders equity.
The entire process takes a specific period referred to as the fiscal year or trading period of the given company. Greyhound Co. is a transportation company, which employs the financial accounting cycle in the running of its business activities. The fiscal period of the company starts in January and ends in December.
On following the accounting principle for Greyhound Co. in the year ended December 2010, the accounting cycle was developed where the cycle started with the recording of the individual transactions in the books of accounting leading up to the preparation of the financial statements and the final closing process (Hoover’s Inc., 2011). Analyzing and Recording Transactions via Journal Entries The first major step in the financial accounting cycle is the analysis and recording of the various transactions engaged by the company via journal entries.
During this step, any transaction that the company engaged in was recorded as a journal entry. The journal entries are a chronological account of the various transactions engaged by a business. All the transactions of Groundhog Co. were recorded on the debit and credit sides of the journal depending on how each item affected the trial balance (Elliot & Elliot, 2004). Posting Transactions to Ledger Accounts The next step involves the posting of the various journal entries to the ledger accounts. The ledger is a record of the various accounting transactions by accounts.
Groundhog Co. maintains several accounts similar to other business entities. These accounts include the cash at hand account, cash at bank account, an assets account, the accounts for the various expenses just but to name a few. During this step, all the transactions recorded in the journal are recorded in the relevant sides of the ledger accounts. Preparing Unadjusted Trial Balance The next step is the preparation of the unadjusted trial balance. During this step, all the various ledger accounts are analyzed and their balances posted to the unadjusted trial balance.
The trial balance contains a list of all the ledger accounts that are kept by Groundhog Co. since one transaction has double effect on the debit and credit sides of the journal, the trial balance should have equal summation totals of all the balances in the ledger accounts. Preparing Adjusting Entries at the end of the Period However, the trial balance may not balance since there are some transactions that alter the balances hence the need for adjusting the entries at the end of the fiscal year. The adjusting entries are made for the various items that are accrued or deferred. During this stage, the entries are journalized and posted to the T-accounts in the general ledger. Preparing Adjusted Trial Balance After incorporating all the above changes, a new trial balance is prepared inclusive of the adjusting entries. This trial balance is prepared at the end of the fiscal year when no other transactions can be included.
Preparing Financial Statements After the preparation of the adjusted trial balance, the nest step is the preparation of the financial statements. The four main financial statements prepared by Grey Hound Transport Company are the Statement of Financial Position, which is also known as the balance sheet, Statement of Comprehensive Income, which is also known as the Profit and Loss statement, Statement of Changes in Equity and the Statement of cash flows. Closing Temporary Accounts via Closing Entries After the preparation of the financial statements, the next step involves the closure of the various accounts using the closing entries. During this stage, the balances of the temporary accounts are transferred to owner’s equity. The various temporary accounts include all the revenues accounts and the expenses accounts.
Preparing Post Closing Trial Balance This leads to the preparation of the final trial balance after all the closing entries are made. This also marks the end of the accounting cycle and the detailed information can now be used by the auditors, owners and other stakeholders for any decision-making purposes (Friedlob & Franklin, 1996). Accounting Cycle Flow Chart References: Elliot, B.
, & Elliot, J. (2004). Financial accounting and reporting. London: Prentice Hall.
Friedlob, G., & Franklin J. (1996). Understanding balance sheets. New York, NY: John Wiley & Sons. Hoover’s Inc.
(2011). Grey Hound Transportation Co. financial statements. Retrieved from http://www.hoovers.com/free/co/fin/income.xhtml?ID=10205&period=A