The Accounting Cycle
By: Alyssa Ritz
Steps to the Accounting Cycle
2. Journalize - a general journal is used to record transactions in chronoligical order with the debit and credit amounts.
3. Post - transactions are posted to the accounts they impact, whihc are part of a general ledger.
4. Prepare worksheet - a worksheet is used to record adjustments made, along with finding the net income or net loss of a business.
5. Prepare Financial statements - the income summary is all the expenses and the revenue of a business in a document, along with the net income or net loss that is then used to find percentages of revenue and expenses. The balance sheet is all the assets on one side and all liabilites and owner's equity on the other, which should then equal one another.
6. Journalize adjusting and closing entries - for adjusting entires, expenses are always debited, and recorded to the general journal to maintain records of any business transactions. Closing entries are you close revenue(debit), all expenses(credit), income summary(depends on net income/net loss), and drawing.
7. Post adjusting and closing entries - post adjusting and closing entries to a general ledger to make sure your data and your totals equal.
8. Prepare post-closing trial balance - all permanent accounts in a documents, including assets and liabilites, along with capital, that equal each other and have a remaining balance.
a visual of what the accounting cycle looks like
a general journal is the most basic and most important document in this cycle
a simple exapmle of a transaction that would lead to use of the accounting cycle
Want to Learn More?
Check out this video that explains in detail different parts of the accounting cycle!