Financial Accounting for Managers, 2/e, 2nd Edition

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Accounting Cycle

CHAPTER OBJECTIVES

This chapter will help the readers to:

• Understand the accounting process leading to the preparation of the profit and loss statement, and the balance sheet.
• Differentiate between real accounts, personal accounts and nominal accounts.
• Apply the rules for debiting or crediting different types of accounts.
• Understand the process of ledger posting, balancing of accounts and preparation of trial balance.
• Prepare the profit and loss statement, and balance sheet from a given trial balance and year-end adjustment entries.

The financial statements—the profit and loss statement, the balance sheet and the cash flow statement— convey useful information about the financial health of a business enterprise. Every manager ...