8 short steps
Financial transactions start the process.
The transaction is listed in the appropriate journal, maintaining the journal’s transactions.
The transactions are posted to the account that it impacts. These accounts are part of the General Ledger.
At the end of the accounting period you calculate a trial balance.
Many times your first calculation of the trial balance shows that the books aren’t in balance. Then you look for errors and make corrections called adjustments, which are tracked on a worksheet.
Adjusting journal entries
You post any corrections needed to the affected accounts once your trial balance shows the accounts will be balanced once the adjustments needed are made to the accounts.
You prepare the balance sheet and income statement using the corrected account balances.
Closing the books
You close the books for the revenue and expense accounts and begin the entire cycle again with zero balances in those accounts
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