Accounting Cycle, Steps / Phases of Accounting Cycle: Detailed

The series of steps begin when a transaction takes place and end with its addition in the financial declarations.

Content in this Article.
hide.

Accounting Cycle:

Accounting cycle or accounting procedure consists of the following:

Determining the transactions from source files like purchase orders, loan arrangements, billings, and so on
Recording the deals in the journal correct and other subsidiary books as and when they occur.
Categorizing all entries posted in the journal or subsidiary books and posting them to the appropriate journal accounts.
Summarizing all the ledger balances and preparing the trial balance and last accounts with a view to establishing the revenue or loss made during a specific duration and ascertaining the financial position of the business on that particular date.

The steps or stages of accounting cycle can be developed as under:

( i) Recording of Deal: As quickly as a transaction occurs it is at first taped in subsidiary book.
( ii) Journal: The transactions are recorded in Journal chronologically.
( iii) Ledger: All journals are published into ledger chronologically and in a classified manner.
( iv) Trial Balance: After taking all the journal account closing balances, a Trial Balance is prepared at the end of the period for the preparations of financial statements.
( v) Change Entries: All the changes entries are to be taped effectively and changed appropriately before preparing monetary declarations.
( vi) Changed Trial Balance: An adjusted Path Balance might also be prepared.
( vii) Closing Entries: All the small accounts are to be nearby the transferring to Trading Account and Earnings and Loss Account.
( viii) Financial Statements: Financial declaration can now be easily prepared which will exhibit the true monetary position and operating outcomes.

Recommended