We make remembering accounting rules and connections easy. The following list shows the connections between the Profit & Loss Statement and the balance sheet accounts.

Sales revenue > Cash and Debtors

Cost of goods sold expense < Stock

Operating expenses > Cash

Operating expenses < Prepaid expenses

Operating expenses > Creditors

Operating expenses > Accrued expenses payable

Depreciation expense < Fixed assets

Interest expense > Accrued expenses payable

Income tax expense > Accrued expenses payable

When you’re doing your accounts, you need to do things in a certain order. Keep track of the bookkeeping cycle with the following useful flow chart:

Transactions (and certain other events) > Original Entries in Journals > Postings in Nominal (General) Ledger Chart of Accounts > End-of-Period Adjusting Entries > Preparation of Financial Statements, Tax Returns and Internal Accounting Reports > Closing Entries at End of Year