The Accounting Cycle: Step-by-Step Guide to Financial Statement

The Steps of the Accounting Cycle The accounting cycle is the steps in preparing financial statements.It is called a cycle because the steps are repeated each reporting period.The accounting cycle is important because it ensures that all the money coming into or going out of a business is accounted for.Below you will the accounting steps as well as the explanation. 1.Analyze transactions- Analyze transactions to prepare for journalizing 2.Journalize- Record accounts, including debits and credits, in a journal 3.Post- Transfer debits and credits from the journal to the ledger 4.Prepare unadjusted trial balance- Summarize adjusted ledger accounts and amounts 5.Adjust and post- Record adjustments to bring account balances up to date; then journalize and post 6.Prepare adjusted trial balance- Summarize adjusted ledger accounts and amounts 7.Prepare financial statements- Use adjusted trial balance to prepare financial statements 8.Close accounts -Journalize and post entries to close temporary accounts 9.Prepare post-closing trial balance- Test clerical accuracy of the closing procedures 10.Optional reverse and post- Reverse certain adjustments in the next period-optional step Steps 4, 6, and 9 can be done on a work sheet.A work sheet is useful in planning adjustments, but adjustments (step 5) must always be journalized and posted.Steps 3, 4,6 and 9 are automatic with a computerized system. ACCT - 1010: Principles of Accounting Assignment #6 Instructor:Kristie Hardy Anika Graham