The accounting cycle is the process of recording business transaction and processing accounting data to generate useful financial information i.e. financial statement including income statement, balance sheet, cash flow statement and statement of shareholders equity. The time period principle required that a business should prepare it's financial statement after a specified period of time, say a year, a quarter or on a monthly basis. This is achieved by following the accounting cycle during each period. Accounting cycle starts from recording individual transaction in the books of accounting and ends at the preparation of financial statement and closing process.
Major steps in accounting cycle
1. Identify the transaction
2. Analyzing and recording transaction via journal entries
3. Posting transaction to ledger accounts
4. Preparing unadjusted trial balance
5. Preparing adjusting entries at the end of the period.
6. Preparing adjusted trial balance
7. Preparing financial statement
8. Closing temporary Accounts via closing entries
9. Preparing post closing trial balance
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