Assignment 1 Student
Assignment 1 Student
Assignment 1 Student
Assignment (1)
Deadline: Saturday 16/10/2021 @ 23:59
Q2. In chapter 3, slide 42, there is a summary of the accounting cycle. Describe each step. (2 Marks)
Accounting cycle includes :
Identifying the transaction
The accounting transaction which shall be recorded has to be identified at the first place . It
helps us to determine what transactions are to be recorded
Analyzing the transaction
In this step we analyze how the transaction affects the financial statements of the entity . Does it
affect the statement of profit and loss or does it affect the position of assets and liabilities and the effect it
has on cash flow of entity
Recording the transaction
We then record the transaction to various books , like journal , ledger and then prepare trial
balance from it and finally financial statements
Q3. Explain the purpose and the importance of the income statement, and prepare the income
statement for ABC company based on the following information taken from the trial balance in 2020
(2 Marks)
College of Administration and Finance Sciences
The income statement is being prepared in order to find out what is the end result of the company I.E.
whether the business in earning the profit or is suffering from the loss at the end of the financial year.
It helps the business to know that the year that the business was done, whether in that year the business
has earned anything or not.
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