Acc 290 - the Financial Statements

Reflection - Week Four

ACC/290

February 4, 2013

Reflection - Week Four

Team A realizes that each of the objectives covered in week three are important to the practice of accounting and how they are used in businesses, so each objective will be discussed within this reflection. However, closing entries proves itself as the most vital. Without closing entries, accounting books would run continually, not giving an accurate account of retained earnings. The process of closing entries opens the closed accounts to receive new data about revenues, expenses, and dividends separate from previous accounting periods (Kimmel, Weygandt, & Kieso, Chapter 4, 2010).

Prepare Closing Entries, Reversing Entries, and a Post-Closing Trial Balance

Closing entries are defined as the process of "transferring net income (or net loss) and dividends to Retained Earnings, so the balance in Retained Earnings agrees with the retained earnings statement" (Kimmel, Weygandt, & Kieso, 2010, Chapter 4). Businesses prepare closing entries at the end of an accounting cycle to bring balances to a zero on temporary accounts and transfer them to the next accounting cycle. Reversing entries is the opposite of the adjusting entry done in the previous accounting period and is done at the beginning of a new accounting period. Reverse entries are done to undo adjusting entries. Post-closing trial balance is prepared from the ledger once the closing entries are journalized and posted (Kimmel, Weygandt, & Kieso, Chapter 4, 2010).

Prepare a Financial Statement Worksheet

An important part of a business operation is to have a financial statement. Within a business, it is vital to understand the financial statements. A financial statement can be used as a guiding tool for a company and help the company avoid costly breakdowns. A financial statement will allow a business to know where their company stands currently in areas such as assets, liabilities, income, and cash flow. A financial statement takes part of a company's planning process. Financial statements can help a new business get off the ground and attract potential investors. Investors can view a company's financial statement to determine the financial reliability of the operation (Kimmel, Weygandt, & Kieso, Chapter 4, 2010).

Classified Income Statement, Retained Earnings Statement, and Balance Sheet

Classified income statements, retained earnings statements and balance sheets are all an asset to management, shareholders, and potential investors because they paint a picture of the company's financial well-being (Kimmel, Weygandt, & Kieso). A classified income statement, sometimes called a multiple step income statement,