The Accounting Cycle

Darla E. Mann
Indiana Wesleyan Univerisity

The Accounting Cycle:


"the process by which companies produce their financial statements for a specific period" (Miller-Nobles, 2017, p. 207)

Why?

Why

• Uniformity
• Consistency
• Evaluation of Company Performance/Efficiency
• Compliance
• Checks and Balances

"Missing a step in the accounting cycle can throw the entire cycle off-balance because each step in the cycle -- and the accuracy of each step -- is sequentially significant. Steps one through three must be performed sequentially throughout the reporting period while steps four through ten are performed in order at the end of each period. Regardless, each succeeding step can only be performed after completing the immediately preceding step" (Lohrey, 2017).

"Steps 1-3: Journalizing transactions and posting to the accounts" (Miller-Nobles, 2017, p. 207).

"Steps 4-10: Adjusting the accounts, preparing the financial statements, and closing the accounts" (Miller-Nobles, 2017, p. 207).

The Accounting Cycle

• Start with the beginning account balances.
• Analyze and journalize transactions as they occur.
• Post journal entries to the accounts.
• Compute the unadjusted balance in each account, and prepare the un-adjusted trial balance.
• Enter the unadjusted trial balance on the worksheet, and complete the worksheet (optional).
• Journalize and post adjusting entries.
• Prepare the adjusted trial balance.
• Prepare the financial statements.
• Journalize and post the closing entries.
• Prepare the post-closing balance.

Accounting Cycle

Entry-Level: you may be responsible for inputting the transactions.
Mid-Level: You may be responsible for finalizing the statements.
Executive Level: You may be responsible for over-seeing the accounting cycle.


*All levels in the accounting field should be familiar and able to participate and interpret all steps of the Accounting Cycle.

"An ethical business creates honest and accurate financial statements, which provide the basis for honest and accurate tax reporting" (Gartenstein, 2017).

"Lying lips are an abomination to the Lord, but those who act faithfully are his delight" (Proverbs 12:22).

References
References
Gartenstein, D. (2017) "How Do Ethics Affect the Financial Results of a Company?" AZ Central. Retrieved on August 1, 2017 from http://yourbusiness.azcentral.com/ethics-affect-financial-results-company-1...

Lohrey, J. (2017). "The Importance of Not Missing a Step in the Accounting Cycle." AZ Central. Retrieved on August 1, 2017 from http://yourbusiness.azcentral.com/importance-not-missing-step-accounting-cy...

Miller-Nobles, T., Mattison, B., & Matsumura, E. (2016). Pearson Custom Library: Horngren’s Accounting. 11TH Ed. Fundamentals of Corporate Finance. 3RD Ed. Boston, MA; Pearson Learning Solutions.
darla.mann@myemail.indwes.edu

darla.mann@myemail.indwes.edu