Accounting Cycle 1.
Identifying and Recording - The first step in the accounting cycle is analysis of transactions and selected other events. The first problem is to determine what to record. 2.
Journalization- chronologically lists transactions and other events, expressed in terms of debits and credits to accounts. 3. Posting - The procedure of transferring journal entries to the ledger accounts. 4.
Trial balance - lists accounts and their balances at a given time. 5.Adjustments - makes it possible to report on the balance sheet the appropriate assets, liabilities, and owners’ equity at the statement date. Adjusting entries also make it possible to report on the income statement the proper revenues and expenses for the period.
6. Adjusted trial balance - It shows the balance of all accounts, including those adjusted, at the end of the accounting period. The adjusted trial balance thus shows the effects of all financial events that occurred during the accounting period. . Preparing Financial Statements - Records that outline the financial activities of a business, an individual or any other entity. Financial statements are meant to present the financial information of the entity in question as clearly and concisely as possible for both the entity and for readers.
Financial statements for businesses usually include: income statements, balance sheet, statements of retained earnings and cash flows, as well as other possible statements. 8.Closing - The closing process reduces the balance of nominal (temporary) accounts to zero in order to prepare the accounts for the next period’s transactions. 9. Post Closing Trial Balance - It is the trial balance after closing, consists only of asset, liability, and owners’ equity accounts, the real accounts.
10. Reversing entries - After preparing the financial statements and closing the books, a company may reverse some of the adjusting entries before recording the regular transactions of the next period.
