Doug Maltbee was successful in his work because he was capable to attain a net income of $1,400 as shown in the Income Statement prepared. Such profit implies that the revenue generated from sales exceeded the operating costs incurred. This means that Doug Maltbee is well off by $1,400 more assets at the end of August when compared to May when he commenced the business operations.
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The steps of the accounting cycle are:
Business transactions are noted and source documents prepared for them.
Quantification of transaction and classifying to respective accounts.
Posting of transactions in the accounts noted in previous step.
General journals passed to ledger accounts.
Preparation of trial balance and adjustment of any errors that might be revealed through such statement or other internal control.
Adjusted trial balance prepared after all adjusting entries are posted to their respective ledger accounts.
Preparation of the final accounts.
Posting of closing journal entries to the ledger accounts.
Passing of reversal entries at the beginning of the next month/year, namely for accruals and prepayments to aid in the commencement of the next accounting cycle.
Lewis R.; Pendrill D. (1996). Advanced Financial Accounting. Fifth Edition. Washington: Pitman Publishing.See More on Acounting, Statement