Worksheet – Introduction to Accounting Reset Form

Accounting skills are essential when starting and operating a new business. The Introduction to
Accounting course described key concepts and principles for Accounting and provided an
overview on the different types of financial statements available. Additionally, the course
described the Accounting lifecycle. Use this worksheet to document your questions, thoughts,
ideas, and action items as they relate to accounting. The questions below follow the topics
discussed in the course. You can use the fillable PDF form fields or print the worksheet and
write in the space provided.

Accounting is the art of recording, classifying, summarizing, and

What is Accounting?
Accounting is important to any business because the financial information allows
entrepreneurs to make informed business decisions. Economic events are measured and
described by financial processes. Use the table below to list ways your business uses
accounting and the different types of users who use the accounting information.

Uses Users

Table 1 - Business Uses and Users

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  Worksheet – Introduction to Accounting
Accounting Lifecycle
An accounting period reflects all the financial activity within a given period, such as quarterly
and yearly. At the end of each accounting period, the organization must prepare all financial
statements so that investors can compare the results of successive time periods.

Use the checklist below to ensure you are following the accounting lifecycle. Mark each box as
the steps are completed.

Step One: Analyze Business Transactions. Here, you begin with business transactions, which can
include the sale of a product, the purchase of supplies, and rent.

Use the space below to write down recent business transactions and the amount for each.

Step Two: Record Transactions in Journal. Now you will use a journal to enter the recorded
business transactions. Make sure you record a debit and credit for each transaction. For example, you
would record the rent expense under debit and credit that amount under the Cash account.

Step Three: General Ledger. The business transactions are then posted to the general ledger
account that it impacts. A general ledger is a moment by moment record of everything that happens
in the business. There will be a general ledger for each account. For example, you would record the
rent expense in the Cash Account under the credit column.

Step Four: Unadjusted Trial Balance. At the end of the accounting period you should calculate a
trial balance. The trial balance assesses the equality of debits and credits as they are recorded in the
general ledger. The preparation of a trial balance is very simple. All you have to do is list the ledger
accounts balances.

Step Five: Adjusting Entries. Sometimes the first trial balance calculation may show that the books
are not balanced, so you will need to look for errors and then make adjustments. This may include
making adjustments to record an expense that may have been incurred but not yet recorded.

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  Worksheet – Introduction to Accounting
Go through the Trial Balance to ensure the books are balanced. If not, you will need to record
adjusting entries. For example, if rent was prepaid for three months you would calculate the
total for each month.

Step Six: Adjusted Trial Balance. After adjustments are made, you will need to recalculate the trial
balance to include any adjustments made to ensure the accounts are balanced.

Add any adjustments from the trial balance to the Adjusted Trial Balance. For example, since rent
was prepaid for three months, you would record the prepaid rent amount for the next two months on
one line and then the rent expense for the current month on another line.

Step Seven: Financial Sheets. Once the balances are corrected from the adjusted trial balance, you
will then need to prepare the balance sheet and income statement.

Use a Balance Sheet to record your current assets, fixed assets, liabilities, and equity. Refer
to the Balance Sheet section for an example.

Use an Income Statement to track your sales and expenses for the accounting period. Refer
to the Income Statement section for an example.

Step Eight: Closing Entries. Next, the accounts need to be closed out to avoid having revenue or
expenses of another period added to current period. You will need to transfer the balances from
temporary accounts to permanent accounts.

Step Nine: Post Closing Trial Balance. The last step is to prepare a post-closing trial balance to
ensure that all accounts have been closed properly and to test the equality of debit and credit
balances of all the balance sheet accounts.

Record any accounts having non-negative balances after closing entries have been passed and
posted. During the post-closing trial balance, it is important to ensure that the debit and credit totals
are equal.

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  Worksheet – Introduction to Accounting
Income and Expenses
Money may flow into a business as cash sales, credit card sales, or other methods. Money may
go out of a business when inventory is purchased, bills are paid, etc. Think about how money
flows in and out of your business. Using the business transactions from the previous section,
record the items that would be categorized as income and expenses in the table below.

Income Expenses

Table 2 - Income and Expenses

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  Worksheet – Introduction to Accounting
Financial Statements

Balance Sheet
The Balance Sheet is a snapshot of your business. It outlines the financial condition of your
business at a specific point in time and provides a financial perspective by highlighting what
you own, and what you owe to other parties. Use the example Balance Sheet below to record
your current assets, fixed assets, liabilities, and equity used in step seven in the Accounting Life
Cycle section.

Assets Liabilities & Equity

Fixed Assets Equity

Total
Table 3 - Balance Sheet

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Income Statement
The income statement is used to track sales and expenses during a particular period. It is
sometimes called a Profit and Loss (P&L) statement and tells you if your business is profitable
or not. The resulting difference between your income and your expenses is called your net
profit. Use the example Income Statement below to track your sales and expenses used in step
seven in the Accounting Life Cycle section.

Categories End of Period

Total Expenses
Net Profit
Table 4 - Income Statement

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Cash Flow Statement

A cash flow statement is the financial document that presents where the money is coming from
and how it is being spent. In its simplest form, a cash flow statement is presented as follows:
beginning cash balance, plus cash inflows, minus cash outflows, equals ending cash balance. Use
the example Cash Flow Statement below to track how your cash is flowing for the accounting
period.

Activity Value
Operating Activities

Net Cash Flow from Operating Activities

Net Cash Flow from Financing Activities

Net Cash Flow from Investing Activities

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Accounting Resources
After completing the Accounting Lifecycle checklist think about if this is something you want
to do or if you want to have someone else do. As discussed in the course, there are several
options for handling your accounting responsibilities. In the space below write down your pros
and cons for using each option.

Do it Yourself Hire an Accountant Outsource

Table 6 - Resources Pros and Cons

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 Worksheet – Introduction to Accounting
Resources:
This worksheet is intended to help you document your ideas and possible solutions to common
challenges small businesses face daily. You are not alone! If you would like talk to someone
about your business, the SBA has a broad network of skilled counselors and business
development specialists waiting to help your business start, grow, and succeed. Below is a short
description of our resource partners:

There are more than 1,000 Small Business Development Centers (SBDCs) located around the
country. SBDCs provide management assistance to current and prospective small business
owners.

• SCORE is a powerful source of free and confidential small business advice to help build your
business. More than 10,000 SCORE volunteers are available to share their experience in lessons
learned in small business.
• Women’s Business Centers (WBCs) assist women and men in achieving their dreams by
helping them start and run successful businesses. Over 90 WBCs are located around the country.
• The SBA has over 60 District Offices located throughout the country to help you start and grow
your business.
• The SBA Learning Center provides self-paced training courses, videos, worksheets, and
checklists designed by business development specialists and educators to help entrepreneurs
learn about business ownership. Courses provide introductory and intermediate entrepreneurship
education.
• The SBA’s Office of Women’s Business Ownership (OWBO) serves as an advocate for
women-owned businesses. The office oversees a nationwide network of 110 Women’s Business
Centers that provide business training, counseling and mentoring geared specifically to women,
especially those who are socially and economically disadvantaged. The program is a public-
private partnership with locally based nonprofits.
• The Veterans Business Outreach Program (VBOP) provides entrepreneurial development
services such as business training, counseling and mentoring, and referrals for eligible veterans
owning or considering starting a small business. The SBA has 15 organizations participating in
this cooperative agreement and serving as Veterans Business Outreach Centers (VBOC).
• Procurement Technical Assistance Centers (PTACs) provide local, in-person counseling and
training services for small business owners. They provide technical assistance to businesses that
want to sell products and services to federal, state, and/or local governments. PTAC services are
available either free of charge, or at a nominal cost. PTACs are part of the Procurement
Technical Assistance Program, which is administered by the Defense Logistics Agency.

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  Worksheet – Introduction to Accounting
BusinessUSA is a centralized, one-stop platform that makes it easy for businesses to find and
access federal services. BusinessUSA lets you easily search by topic, industry or ownership
type, and provides tailored results that can help you during every stage of business, from
starting up to going global and selling to the government. Find more information by going to
business.usa.gov.

Find all your local resources in one place using our handy zip-code tool.

For more information about SBA programs and services, please download the Small Business
Resource magazine.

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