Question

What will be the final output once the accounting cycle has been completed? Discuss.

Answer 1

Once the accounting cycle is completed the final output are three statements. These are as follows:

1. Balance Sheet
2. Income Statement
3. Statement of Retained Earnings.

First journal entries are passed from the Trial Balance available. After that all the journal entries are posted to their respective ledgers and then the Income statement is prepared taking into account all the operating transactions i.e the revenue and expenditure. This helps us to assess the net gain or net loss during the current period. After this the next statement that is the Retained Earnings is prepared. This statements shows how much earnings the company wants to retain before distributing to its members or shareholders. Once this is done the final statement that is the Balance Sheet is prepared. It shows the total assets and liabilities and shareholder's equity that the company has during the current period.