BOOKKEEPINGP R O F E S S I O N A L D I P L O M A I N
Lesson 2: The Accounting Cycle
The accounting cycle
Lesson ObjectivesLesson 2
Key finance processes
Benefits of sound processes
Life cycle of a transaction
Typical business transactions
Ni qui t a Hart l ey
Meet youreducator
“You don’t have to be great to start, but you have to
start to be great.”
- Zig Ziglar
B . C o m A c c o u n t i n g
P G D A
C A ( S A )
Education
w w w . s h a w a c a d e m y . c o m
Chat with Morpheus
Questions?
Summary notesQuestions?
Lesson quizzes
Questions?
su p p o r t @sh a w acad e my.co m
Ask your educator
Questions?
Trivia time
What did the accountant, Walter Diemar, invent in 1928?Answer:
Will be revealed at the end of the lesson.
Lesson 1 review
Accounting frameworks
Double-entry system
Where it all began
• IFRS: International Financial Reporting Standards
• GAAP: Generally Accepted Accounting Principles
• AFS: Annual Financial Statements
• GL: General Ledger
• TB: Trial Balance
Acronyms
The Accounting Cycle
The accounting cycle• A.K.A the bookkeeping cycle
• End goal to produce accurate financial summary
• Process happens over a financial year
• Completed in a series of steps
The accounting cycle
Recording• Source documents
- Invoice- Bank statements
• Record every transaction
Posting• Post to the ledgers• Sub ledgers• General ledger = list
of transactions• Use double-entry
system
Unadjusted TB • Prepare initial trial
balance report• At the end of the
period• Two columns• Must balance
STEP 1 STEP 2 STEP 3
The accounting cycle
Errors & adjustments• Make any
corrections• Adjustments:
- Timing- Tax- Incomplete records
Adjusted TB• Prepare final trial
balance• Two columns• Must balance• Basis for AFS
Financial statements• Use TB to prepare
annual financial statements
• Additional steps once finalised:
- Pre-closing TB- Post-closing TB- Roll-forward
STEP 4 STEP 5 STEP 6
Recording
Posting
Unadjusted TB
CorrectionsAdjustedTB
Financial Statements
Pre & Post TB
Roll-forward
Recap
Trivia time
What is the step in between the unadjusted and adjusted trial balance?Answer:
Corrections and adjusting entries
Key Financial Processes
Processes
• Capturing
• Payments
• Posting
• Reconciliations
• Reporting
• Reconciliations
Daily Weekly Monthly
1
2
3
Treasury
Billing & credit
Procurement
Key processes
4
5
6
Taxation
Accounts receivable
Accounts payable
Key processes
7
8
9
Travel management
Payroll systems
Asset management & safeguarding
Key processes
Benefits
Prevent misappropriation of
funds
Fraud Error
Trivia time
List one of the key business processes that needs to be managed within the finance function?Answer:
Payroll, Tax, Assets, Travel, Procurement, etc.
Typical Transactions
Life cycle of a transaction• Initiation
• Processing
• Reconciliation
• Reporting
1
2
3
Type of business
Industry
Mode of operation
Typical business transactions
Type of businesses
• Sole proprietor
• Partnership
• Joint venture
• Listed entity
Customers
Face to face Online B2B
Types of incomeGoods Vs. Services
Goods Services
Industry• Financial services
• Non-profit
• Education
• Agriculture
• Manufacturing
• Retail
• Beauty
• Entertainment
Transactions• Incurred to make a sale
• Expenditure:
• Nature
• Function
• Monthly running costs
• Variable
• Fixed
True orFalse?
The life cycle of a transaction is initiation, reporting, processing and then reconciliation?Answer:
False
Types of expenses• Salaries
• Audit fees
• Rent and utilities
• Marketing
• Insurance
• Tax
Types of expenses• Bank account
• Fees
• Interest
• Loans
• Interest
• Assets
• Depreciation
In a nutshell
Accounting cycle Key processes Typical
transactions
Trivia time
What did an accountant, Walter Diemar, invent in 1928?
Answer:
Bubblegum!
#shawBK
ChallengeHave you considered starting
your own business? Do you
have a business? Share a few
typical transactions.
ToolkitsM O D U L E T O O L K I T
Get all your module notes,lesson slides and bonus content!
Course notes developed by your educator
Students who purchase the toolkits are 5X more likely to achieve their goals
LESSON ASSIGNMENT
01 YOUR CLASS, YOUR TIME.
02Change class date and
time
03Restart the
course schedule
04Watch any time
HOW TO ATTEND YOUR LESSONS
N E V E R M I S S O N E
D O N ’ T F O R G E T T O D O W N L O A D T H E A P P !
Completed lessons
1 2 4
5 6 7 8
3 See you soon for
L e s s o n 3