Lesson 7 - Completing the Accounting cycle
At the end of the accounting year, the accounts are made ready for the next period. This is called closing the books.
Permanent accounts relate to one or more future periods.
Temporary accounts relate to a single accounting period.
Correcting entries are made whenever an error is discovered
Current Assets are cash and other assets that will be converted to cash, sold, or used up in the business within one year of the balance sheet date.
Long-Term Investments are generally investments in debts such as loans, notes, bonds, mortgages or shares in another corporation that is expected to be held for many years.
Property, Plant, and Equipment are long-lived, tangible assets that are used in the production of goods or services and are not intended for sale
Intangible Assets are long-lived assets that do not have physical substance
Non-current liabilities are obligations expected to be paid after one year.
The content of equity varies with the form of business organization. In a proprietorship, there is one capital account under the heading Owner’s Equity. In a partnership, there is a capital account for each partner under the heading Partners’ Equity.
