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.

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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.

Steps/Phases of Accounting Cycle

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

  • Accumulated Liabilities
  • Capital Structure
  • Book Keeping
  • Thriller Account
  • Accounting Price Quotes
  • Stages of Accounting
  • Capital Losses and Earnings Losses
  • Capital Receipts and Profits Receipts
  • Contingent Assets and Contingent Liabilities

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