An account on accounting
An explanation on the accoutning cycle
The steps of the accounting cycle
1. Analyzing transactions- Identifying and analyzing transactions involves looking at the source documents, such as bank statements, checks, and purchase orders, that describe the transactions and their purpose, including the transaction amount.
2. Journalize- Journalizing refers to using double-entry accounting to record the appropriate debits and credits for a transaction into a journal.
3. Posting- Posting is the transfer of the debits and credits from the journal to the ledger. While a journal is simply a list of transactions, a ledger is a collection of all of the company’s accounts.
4. Prepare Work Sheet- The main purpose of a worksheet is that it reduces the likelyhood of forgeting an adjustment and it reveals arithmatic errors (This is an informal document).
5. Prepare Financial Statements- Financial statements are reports prepared by a company's management to present the financial performance and position at a point in time.
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 and Closing entries are journal entries made at the end of an accounting period which transfer the balances of temporary accounts to permanent accounts.
7. Posting adjusting and closing entries- The income summary account is used to move the temporary account money to the capital account.
8. Prepare post-closing trial balance- A post-closing trial balance checks the accuracy of the closing process, and proves that the books are in balance at the start of the new accounting period.