The Accounting Cycle
Step 1: Analyzing Transactions
Analyzing Transactions starts the accounting cycle. Transactions involve any exchange of a company's assets, loans or debt, and the withdrawal of money to the company's owners.
Step 2: Journalize
Step 3: Post
Step 4: Prepare a Worksheet
Step 5: Prepare financial statements
Step 6: Journalize Adjusting and Closing Entries
This step includes transferring adjustments into the journal from the worksheet as well as transferring balances from temporary accounts to the income summary. The temporary accounts include the revenue, expenses, and drawing. Then the income summary account is transferred to the capital.
Step 7: Post Adjusting and Closing Entries
Step 8: Prepare Post-Closing Trial Balance
The last step is to create a post-closing trial balance which will be transferred onto the next fiscal period for the beginning balances of the permanent accounts. Make sure to list both the debit and credit accounts and compare to make sure the two balance. No temporary accounts are included because their totals equal zero.