Accounting Cycle

By: Rachel Iula

The Eight Steps

1. Analyses transactions- identify the transactions and determine the order of the accounts. Then decide which accounts are affected and the amount needed to be recorded

2. Journalize- A journal is used to list all the transactions in chronological order before they are entered into the general ledger

3. Post- Posting to the ledger is a collection of accounts that shows the changes made to each account as a result of past transactions, and their current balances.

4. Prepare work sheet- you look for errors and make corrections called adjustments, which are tracked on a worksheet

5. Prepare financial statements-after having made all the adjustment entries and prepared the final trial balance, you prepare the balance sheet and income statement using the corrected account balances

6. Journalize adjusting and closing entries-Adjusting entries are journal entries recorded at the end of an accounting period to adjust income and expense accounts so that they comply with the accrual concept of accounting

7. Post adjusting and closing entries-Both closing entries are acceptable and both result in the same outcome. All temporary accounts eventually get closed to retained earnings and are presented on the balance sheet

8. Prepare post-closing trail balance- It is prepared to test the equality of debits and credits after closing entries are made. Since temporary accounts are already closed at this point, the post-closing trial balance contains real accounts only

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