Accounting Cycle

[shahanasumi35]

      
Accounting Cycle

Accounting cycle is a step-by-step process of recording, classification and summarization of economic transactions of a business. It generates useful financial information in the form of financial statements including income statement, balance sheet, cash flow statement and statement of changes in equity.

The time period principle requires that a business should prepare its financial statements on periodic basis. Therefore accounting cycle is followed once during each accounting period. Accounting Cycle starts from the recording of individual transactions and ends on the preparation of financial statements and closing entries.
Major Steps in Accounting Cycle

Following are the major steps involved in the accounting cycle. We will use a simple example problem to explain each step.

    Analyzing and recording transactions via journal entries
    Posting journal entries to ledger accounts
    Preparing unadjusted trial balance
    Preparing adjusting entries at the end of the period
    Preparing adjusted trial balance
    Preparing financial statements
    Closing temporary accounts via closing entries
    Preparing post-closing trial balance





      

[munna99185]

Informative post.


Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University

[taslima]

nice

[shahanasumi35]

Thanks to all.

[Md. Al-Amin]

A businessman should make a harmony between accounting cycle and practical cycle of his business.

[sajib]

The sequence of six steps in the processing of financial transactions (from the time they occur to their inclusion in financial statements) pertaining to an accounting period. These steps are: (1) analyzing the transactions as they occur, (2) recording them in the journals, (3) posting debits and credits from journal entries to the general ledger, (4) adjusting the assets with a trial balance, (5) preparing financial statements, and (6) closing the temporary accounts.