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The Accounting Cycle

Accounting cycle for far

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11 views

The Accounting Cycle

Accounting cycle for far

Uploaded by

futurecpalepasser
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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The Accounting cycle

The accounting cycle represents the steps or procedures used to record transactions and
prepare financial statements. The accounting cycle implements the accounting processes of
identifying, recording and communicating economic information.

1. Analyzing and Classify Data about an Economic Event

Identifying the transactions from the events is the first step in the accounting process.

Events are analyzed to find the impact on the financial position or to be more specific the
impacts on the accounting equation.

Documents such as; a receipt, an invoice, a depreciation schedule, and a bank statement, etc.
provide evidence that an economic event has actually occurred.

2. Journalizing the transaction

Transactions having an impact on the financial position of a business are recorded in the
general journal.

In the general journal, the transactions are recorded as a debit and a credit in monetary terms
with the date and short description of the cause of the particular economic event.

3. Posting from the Journals to the General Ledger

Transactions recorded in the general journal are then posted to the general ledger accounts.
The accounts classify accounting data into certain categories and they are recorded in general
journal entries according to that classification.

Depending on the frequency of the transactions posting to ledger accounts may be less
frequent.

4. Preparing the Unadjusted Trial Balance

To determine the equality of debits and credits as recorded in the general ledger, an
unadjusted is prepared. It is a way to investigate and find the fault or prove the correctness of
the previous steps before proceeding to the next step.

Unadjusted trial balance makes the next steps of the accounting process easy and provides
the balances of all the accounts that may require an adjustment in the next step.

The unadjusted trial balance is for internal use only.

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