The accounting cycle is the whole process of collecting and processing all the accounting events of a company. The events start when an accounting transaction occurs and ends with its inclusion in the financial statements. The steps involved in the accounting cycle include transactions data collection and analysis, putting all the transactions into a general journal, posting entries into a ledger, preparing a trial balance, appropriately adjusting entries, preparing a trial balance that IS adjusted, organizing all the accounts into financial statements and closing the books.
Prepaid account records all the purchases and payments that a company makes in advance within a year. Until the benefit of the prepaid purchases or payments is realized, prepaid expenses are labeled as current assets in the balance sheet. As each month passes, the prepaid account for a specific item is decreased until it is depleted. A deferred account on the other hand records all the payments and purchases a company makes for which consumption does not take place within the next one year. The deferred account is held as a noncurrent account in the balance sheet. Both the deferred and prepaid accounts are advance payments for goods and services but the difference is the period under which the consumption of the prepaid good or service occurs.
A trial balance is a list of all the accounts both capital and revenue contained in the general ledger of a business. The list normally contains the name of every nominal ledger account and the balance in it. A post-Closing trial balance on the other hand shows the accounts remaining when all the closing entries are made. it is used in the preparation of the balance sheet.
Do you need an Original High Quality Academic Custom Essay?