Discuss the purpose of financial statements Why are they important and such? What do we know (what have we learned in the course)? The role of the operating cycle, also known as the accounting cycle, is to keep the finances of a corporation in order and makes it easier to for investors to consider the company's operations. It is a time span when 1) Cash is used to acquire goods and services. 2) The goods and services sold to customers. 3) The cash is collected by the business. (Horton & Matsumura, 2014). The steps that are taken during the accounting cycle assures an accurate view of the business's functions in a wide variety of ways. A business owner or investor may want to know things that have gone on day to day or they could want to follow the trends of the company's finances over a period of years. Accounting practices are guided by the Generally Accepted Accounting Principles (GAAP) which are overseen by the Financial Accounting Standards Board (FASB), a private organization that oversees the creation and governance of accounting standards in the United States (find page.) This organization is responsible for setting up the accounting cycle as we now know it. They, however, are not a federal component as the Securities and Exchange Commission (SEC). Steps involved with the accounting cycle What do I know? Almost too much! Seriously The accounting cycle deals with accounts that are assets, liabilities, or equity. Everything that is financially involved with a company is put into those three categories. Buildings, land, furniture and supplies are in the category of assets. Anything that is purchased by the company on credit or anything that has a reoccurring payment is considered a liability. Liabilities are often listed on financial documents as "payable". Equity is the owners claim to the assets of the business. It represents the number of assets that are left over after the company has paid its' liabilities. It is considered the company's net worth. Accounts are entered something called a ledger. This is the way that a business keeps up with what was spent and sold throughout the month. The amounts are then transferred into a device that will break the amounts up into smaller parts. This device is called a T-account The purpose of the T-account is to show the total amount of money coming in and out. The only thing that matters on a T-account is whether a transaction is a debit or a credit. These numbers are then transferred to an unadjusted balance sheet to be prepared for adjustments. Adjustments are the differences in the assets on hand at the beginning of the period and what is on-hand at the time of the period's closing. The purpose of adjustments is to show what the company started with and bring the ledgers up to date with what is on hand. From there, the accounts' totals are entered what is called the adjusted trial balance. These balances record the adjustments made during a period and ensures that the next steps of the accounting cycle are correct