The Nine Steps of the Accounting Cycle
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CheckPoint: The Nine Steps of the Accounting Cycle
The accounting cycle is a logical sequence of procedures used by businesses to record transactions and prepare financial statements. The cycle begins with a transaction and ends with the closing of the books and is repeated each reporting period.
Steps accounting cycle consists of
The accounting cycle consists of nine steps and what each step is responsible for:
Collect and analyze -- As transactions and events related to financial resources occur, they are analyzed with respect to their effect on the financial position of the company.
Journalize Transactions -- After collecting and analyzing the information obtained in the first step, the information is entered in the general journal, which is called the book of original entry.
Post to General Ledgers --The general journal entries are posted to the general ledger, which is organized by account.
The above steps are performed throughout the accounting period as transactions occur or in periodic batch process. The following steps are performed at the end of the accounting cycle.
Prepare an unadjusted trial balance -- At the end of the period, double-entry accounting requires that debits and credits recorded in the general ledger be equal. Preparing an unadjusted trial balance tests the equality of debits and credits as recorded in the general ledger.
Prepare adjustments -- Period-end adjustments are required to bring accounts to their proper balances after considering transactions and/or events not yet recorded. Under accrual accounting, revenue is recorded when earned and expenses when incurred. Thus, an entry may be required at the end of the period to record revenue that has been earned but not yet recorded on the books. Similarly, an adjustment may be required to record an expense that may have been incurred but not yet recorded.
Prepare an adjusted trial balance -- As with an unadjusted trial balance,...
The accounting cycle is a logical sequence of procedures used by businesses to record transactions and prepare financial statements. The cycle begins with a transaction and ends with the closing of the books and is repeated each reporting period.
Steps accounting cycle consists of
The accounting cycle consists of nine steps and what each step is responsible for:
Collect and analyze -- As transactions and events related to financial resources occur, they are analyzed with respect to their effect on the financial position of the company.
Journalize Transactions -- After collecting and analyzing the information obtained in the first step, the information is entered in the general journal, which is called the book of original entry.
Post to General Ledgers --The general journal entries are posted to the general ledger, which is organized by account.
The above steps are performed throughout the accounting period as transactions occur or in periodic batch process. The following steps are performed at the end of the accounting cycle.
Prepare an unadjusted trial balance -- At the end of the period, double-entry accounting requires that debits and credits recorded in the general ledger be equal. Preparing an unadjusted trial balance tests the equality of debits and credits as recorded in the general ledger.
Prepare adjustments -- Period-end adjustments are required to bring accounts to their proper balances after considering transactions and/or events not yet recorded. Under accrual accounting, revenue is recorded when earned and expenses when incurred. Thus, an entry may be required at the end of the period to record revenue that has been earned but not yet recorded on the books. Similarly, an adjustment may be required to record an expense that may have been incurred but not yet recorded.
Prepare an adjusted trial balance -- As with an unadjusted trial balance,...