The Accounting Cycle!

8 Steps to Success


STEP ONE: Analyze Transactions

The first step in the accounting process is to analyze every transaction (economic event) that affects the business. The accounting equation (Assets = Liabilities + Owner's Equity) must remain in balance after every transaction is recorded!

STEP TWO: Journalizing

Keeping track of all transactions in the financial journals of a business, using double-entry tables. Each transaction record in a journal must include account details, the amount to be recorded, the date of the transaction, and a brief description of the transaction itself.


Process of copying either summary-level or detailed entries in an accounting journal into the general ledger. Posting may be done at any time, in batches, or at the end of an accounting period.

STEP FOUR: Prepare Work Sheet

An accounting worksheet is designed to assist in closing out the books.

An accounting worksheet is a ledger sheet that lists all the balances of each account a business has on a certain date. An accounting worksheet is done at the end of an accounting period, and it is used to make adjustments to accounting entries, to close entries and finally to prepare financial statements.

STEP FIVE: Prepare Financial Statements

Financial statements are prepared using the corrected balances from the adjusted trial balance. These are one of the primary outputs of the financial accounting system. Your financial statements should include an income statement, a balance sheet and a cash-flow statement.

STEP SIX: Journalizine Adjusting & Closing Entries

  • Transferring the adjustments from the work sheet to the journal and transferring the balances of the temporary accounts to the income summary and capital accounts.
  • STEP SEVEN: Posting Adjusting & Closing Entries

    An important part of closing the accounting books for your business is posting to the General Ledger any corrections or adjustment entries you find as you close the journals. This type of posting consists of a simple entry that summarizes any changes you found.

    STEP EIGHT: Prepare Post-Closing Trial Balance

    Post-closing trial balance: once the closing entries are prepared and posted to the general ledger, another trial balance would be prepared to verify that the total dollar amount of debits in the general ledger equals the total dollar amount of credits. Remember, if debits equal credits, the accounting equation will balance. A trial balance prepared after closing entries are posted is called a post-closing trial balance. The Guitar Lessons Corporation's December 31 post-closing trial balance is shown below.

    YOU ARE DONE! :)

    Here's a tutorial:


    The Accounting Cycle: Prepare Closing Entries (Financial Accounting Series)