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The Accounting Cycle The accounting cycle refers to the sequence in which data is recorded and processed until it becomes part of the financial statements at the end of the period. Required: - i. As an entrepreneur that has a sole proprietor business, for example, retail shop, hypermarket, shop selling bicycles and so on, create a fictitious a business name and choose an appropriate year-end of your choice. (2 marks) ii. What are the two elements of each transaction that occurred in the business? (1 mark) iii. Describe the accounting concept that would be relevant when deciding on how to account for a transaction, which involves an owner of a business taking goods for his own use. (2 marks) iv. Provide a clear description of 20 transactions (cash and credit) pertaining to the business. Hint: The transactions should cover the basic elements of a statement of financial position and income statement (5 marks) v. Next, enter these transactions into the necessary ledgers or T-accounts using the double entry system for recording transactions (for example sales account: personal debtors' accounts, etc.). (5 marks) vi. Once, all accounts have been balanced; prepare the trial balance at the end of the period to check the accuracy of the double entry. (5 marks) vii. Finally, prepare the income statement and statement of financial position for the period ending showing the financial performance and position of your company. (6 marks) viii. Briefly explain the effect of your profit or loss on capital. (2 mark)

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