The Accounting Cycle
Analyzing transactions begins at the start of an account period and continues during the whole period. It is a process that determines whether a particular business event has an affect on the assets, liabilities or owner's equity.
The transaction is listed in the appropriate journal as a debit or a credit. Transactions are recorded in chronological order and as they occur
After recording transactions in the journal to verify accuracy. After posting to the ledger the balances of each account can be determined.
Prepare work sheet
The worksheet is the combination of all the accounts that the business has and their current financial amounts
Prepare Financial Statements
Financial statements are a representation of a businesses financial performance and how it has changed over time. Financial statements include Income statements and balance sheets. It is important to do the income statement first or else financial information will be messed up.
Journalize Adjusting and Closing Entires
Adjusting entries are journal entries recorded at the end of an accounting period to adjust income and expense accounts. Their purpose is to match incomes and expenses during the accounting period.
Post Adjusting and Closing Entries
After journalizing the adjusting and closing entries, transfer the financial information to the general ledger to make the balances equal.
Prepare Post-Closing Trial Balance
A post-closing trial balance should only contain the debit and credit balance for permanent accounts because these are the only accounts that remain after the closing process is completed.