ACCOUNTING CYCLE

ACCOUNTING STEPS

• 1. Collect all source documents.
• 2. Analyze each transaction.
• 3. Journalize each transaction.
• 4. Post to ledger.
• 5. Prepare a trial balance.

ACCOUNTING STEPS

• 6. Prepare a worksheet
• 7. Prepare financial statements
• 8. Journalize and post the adjusting entries
• 9. Journalize and post the closing entries
• 10. Prepare a post-closing trial balance

COLLECT ALL SOURCE DOCUMENTS

• The 1st step in the accounting cycle is assembling all the
• source documents for that month
• This is for the information on the business transactions.

ANYLIZE EACH TRANSACTION

• Next, you any analyze each transaction as
• debit or credit in a T-Chart.
• This will be used in journalize.

JOURNALIZE

• In step 3, you journalize each transaction in a general journal
• You must record which account is debited/credited and by how much.
• This is to record the financial transactions.

POST TO LEDGER

• In step four, you transfer information from the general journal
• Into separate general ledger accounts.
• This is so someone can easily tell the impact on specific accounts
• and to calculate the ending balances

PREPARE A RRIAL BALANCE

• Step 5 is preparing a trial balance.
• this is done to prove that the ledger is correct/ find any errors.

PREPARE A WORK SHEET

• A work sheet is a continuos form, that basically combines Ledger,
• Trial Balance, and income statements.
• You then find the net income/ net loss.
• This is done by subtracting the income statements and balance sheets.
• You the add the difference (to the debit in Income to the credit for balance).

PREPARE A FINANCIAL STATEMENTS

• Financial statements are prepared to summarize the changes resulting
• From business transactions that occur during an accounting period.
• The financial statements are income statement and balance sheets.
• The income statement deals with expenses, income, and revenue.
• The balance sheet has assets, liabilities, and capital accounts.

JOURNALIZE AND POST ADJUSTING ENTRIES

• Adjustments are made to add or subtract to bring an account up to date.
• These adjustments are recorded in the general journal.
• Before they are journalized, "Adjusting Entries" is entered in the
• description column. Next they are posted to ledger accounts in a similar way.

JOURNALIZE AND POST CLOSING ENTRIES

• Closing entries are made to reduce or bring to zero,
• And bring the net income or loss to the capital account.
• On the general journal, you enter the information from the financial
• Statements, such as the ending capital balance.
• After this they are posted, using closing in the description column.

PREPARE A POST-CLOSING BALANCE

• After you post closing entries, you must make a post-closing trial balance.
• It is very similar to the trial balance, but with closing amounts.
• This is done to make sure the total credits and debits are equal.