There are 8 important steps in the accounting cycle. These steps are transactions, recording transactions, posting, trial balance, worksheet, adjusting entries, financial statements and closing.
What is the accounting cycle?
- It is a cycle that helps in recording all the financial transactions of a company.
- It helps in keeping a record, analyzing data, and reporting the findings.
- It plays a key role in maintaining the overall efficiency of work.
What are 8 steps in the accounting cycle?
- Transactions: any financial transactions happening in the company start the process. If there are no transactions then there would not be any cycle.
- Recording transactions: any transactions that have taken place need to be recorded first. This is also called journaling transactions.
- Posting: all the entries are then posted to a general ledger. All the data can be seen in a summarized form in the GL.
- Trial Balance: after the end of the accounting period, all the balance is calculated.
- Worksheet: it is created in order to make sure that the debited balance and the credited balance are equal.
- Adjusting entries: adjustments are made and they are recorded as some journal entries.
- Financial statements: Using the correct balance an income statement, cash flow statement and a balance sheet is maintained.
- Closing: This marks the end of a cycle. The company closes the accounting books and makes a report of the overall cycle.
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