Accounting Cycle

The 8 Step Process

Step 1 - Analyze Transactions

Look at source documents

-Source Document: An original record from which data is obtained for a journal entry

Examples: Memorandum, Check, Sales Invoices, Receipts, Calculator Tapes, etc.

Step 2 - Journalize

1. DATE - Write the date (date column)

2. DEBIT- Write the title of the account being debited (title column) and write the debit amount (debit column)

3. CREDIT - Write the title of the account being credited (title column) and write the credit amount (credit column)

4. SOURCE DOCUMENT - Write the document number (Doc. No. column)

Step 3 - Post

5 STEPS


1. Record the date in the ledger

2. Record the journal page number (Post Ref. column of the ledger)

3. Record the debit/credit in the ledger

4. Calculate the new balance in the ledger

5. Record the ledger account number (Post Ref. column of the journal)

Step 4 - Prepare The Worksheet

1. Write the heading on all three lines


2. Record the trial balances

-Write the general ledger account titles (account title column)

-Write the account balances (debit/credit trial balance column)

-Rule a single line (trial balance column)

-Add the trial balance columns (debit/credit) and compare totals

-Rule double lines across both trial balance columns (debit/credit)

Step 5 - Prepare Financial Statements

-Income Statement: Statement that shows money made in a specific period of time


1. Extend the balance of sales (income credit column)

2. Extend all Expense accounts (changing the trial balance of a few accounts due to adjustments)


-Balance Sheet: Statement that shows worth at the present time


1. Extend all Asset account balances (balance sheet debit column)

2. Extend all Liability & Owner's Equity account balances (Balance sheet credit column)


Income Statement & Balance Sheet

1. Add up both Debit & Credit columns

2. Compare totals (debit/credit columns) to ensure they are equal

3. Rule double lines across both columns (debit/credit)

Step 6 - Journalize Adjusting & Closing Entries

1. Record the adjustments (adjustments column)


2. Prove the adjustment columns

-Add up both debit & credit columns

-Compare totals (debit/credit columns) to ensure they are equal

Step 7 - Post Adjusting & Closing Entries

1. Record the date in the ledger

2. Record the journal page number (Post Ref. column of the ledger)

3. Record the debit/credit in the ledger

4. Record the adjustment amount

5. Calculate the new balance in the ledger

6. Record the ledger account number (Post Ref. column of the journal)

Step 8 - Prepare Post-Closing Trial Balance

1. Write the heading on all three lines

2. Write the title of all the general ledger accounts (account title column) along with their balances (debit/credit columns)

3. Rule a single line across both amount columns (debit/credit)

4. Add up both debit/credit columns

5. Compare totals (debit/credit columns) to ensure they are equal

6. Write the word "Totals" on the line below the last account title

7. Write the debit/credit totals below the single line

8. Rule double lines across both debit/credit columns