The Accounting Cycle

The steps to the cycle

Description

The accounting cycle is an eight step process that begins with the occurrence of a transaction and it is collecting financial information during a fiscal period.

Steps...

1. Analyze Transactions
- The transaction amount, the accounts affected, and what direction they go in must be determined.

2. Journalize
- The transaction is recorded in the journal as a credit or debit.

3. Post
- The journal entries are transferred to the right place in the general ledger.

4. Prepare Work Sheet
- This is where all accounts are tracked.

5. Prepare Financial Statements
- Prepare the income statement and balance sheet using the correct balances.

6. Journalize Adjusting and Closing Entries
- This is prepared to update the accounts before posting them.

7. Post Adjusting and Closing Entries
- Post the accounts in the ledger with the correct amount.

8. Prepare Post-Closing Trial Balance
- Prepare this with the permanent accounts or the accounts which do not have a zero balance.
The Accounting Cycle