Nine Steps of the Accounting Cycle
- Submitted by: newstudent2013
- Views: 747
- Category: Other
- Date Submitted: 05/14/2012 04:36 PM
- Pages: 2
- Report this Essay
[pic]
The following are the nine steps of the Accounting Cycle:
1) Analyze Transactions: The first thing is to identify the account by looking at the transaction which is classified by Debit or Credit. This is done on a daily basis.
2) Journalize Transactions: As part of the recording process, the transaction data is entered on page J1 of the General Journal.
3) Post to Ledger Accounts: The next step is to transfer the journal entries to the ledger accounts. This provides the balances in various accounts and is the last step in the recording process.
4) Prepare a Trial Balance: Debits and Credits are totaled to determine their equity before applying adjustments. The account titles and balances are listed in the same order as appears in the ledger.
5) Journalize and Post Adjusting Entries: Revenues earned and expenses incurred that have not been recognized through daily entries for the current accounting period are recorded on page J2 of the General Journal.
6) Prepare an Adjusted Trial Balance: All account balances are entered in order to generate financial statements. This step proves the equity of total Debits and Credits in the equity after all adjustments are made.
7) Prepare Financial Statements: This step is prepared from the adjusted trial balance 10 column worksheet. It can be done periodically, monthly, quarterly, or annually.
8) Journalize and Post Closing Entries: After completing this step all temporary accounts will contain zero balances. This completes page J3 of the General Journal and the ruling of accounts. This can be done annually.
9) Prepare a Post Closing Trial Balance: Permanent accounts and their balance are listed after journalizing and posting closing entries. The balances of the permanent accounts in the ledger are carried on to the next accounting period. The cycle then starts again with step 1.
The following are the nine steps of the Accounting Cycle:
1) Analyze Transactions: The first thing is to identify the account by looking at the transaction which is classified by Debit or Credit. This is done on a daily basis.
2) Journalize Transactions: As part of the recording process, the transaction data is entered on page J1 of the General Journal.
3) Post to Ledger Accounts: The next step is to transfer the journal entries to the ledger accounts. This provides the balances in various accounts and is the last step in the recording process.
4) Prepare a Trial Balance: Debits and Credits are totaled to determine their equity before applying adjustments. The account titles and balances are listed in the same order as appears in the ledger.
5) Journalize and Post Adjusting Entries: Revenues earned and expenses incurred that have not been recognized through daily entries for the current accounting period are recorded on page J2 of the General Journal.
6) Prepare an Adjusted Trial Balance: All account balances are entered in order to generate financial statements. This step proves the equity of total Debits and Credits in the equity after all adjustments are made.
7) Prepare Financial Statements: This step is prepared from the adjusted trial balance 10 column worksheet. It can be done periodically, monthly, quarterly, or annually.
8) Journalize and Post Closing Entries: After completing this step all temporary accounts will contain zero balances. This completes page J3 of the General Journal and the ruling of accounts. This can be done annually.
9) Prepare a Post Closing Trial Balance: Permanent accounts and their balance are listed after journalizing and posting closing entries. The balances of the permanent accounts in the ledger are carried on to the next accounting period. The cycle then starts again with step 1.