The accounting cycle is a series of steps that are necessary for the accurate and uniform production of financial statements at the end of the accounting period, typically one month, one quarter or one year. Below, we list the steps that are listed in order of completion of the accounting cycle and a brief summary of each step.
first Identification of Transaction . This transaction may be a revenue or payment for the sale of a product to another business for services.
2nd Analyze the Transaction and how we deal with the accounting balance. For example, you can determine which transaction affects and affect your accounts.
3rd Add a transaction to a journal for example as a sales journal. Magazines are kept in chronological order and can be updated continuously, daily, or even frequently.
4th Add the transaction to the main book . Get all your posts and categorize them in your account.
5th Perform experimental balance . At the end of the billing cycle, debts and credits must be equal, so calculate the entries to secure the match.
6th Prepare the settings . Just because the entries are recognized does not mean that the job is done. Revenue can only be recognized at the end of work, so change your entries.
7th Try changing settings . Perform the adjustments in step 6 and make a test scales. If the debts and credits do not match, you need to modify them to make sure they match.
8th Preparation of Financial Statements . From the adjusted test balance, these adjusted balances are used to prepare the financial statements.
ninth Close accounts when preparing the next accounting cycle. Revenues and expenses must be excluded, which means they need a zero balance. Scales are moved to the next cycle.
While the actual terminology, timelines and other factors of the accounting cycle vary, the above steps are general steps commonly used in the accounting cycle. For realistic scenarios, the simple process supported by computer programs and other tools allows the accountant to unite these steps and make less time and less effort. Often, a computer program allows you to combine the first and second steps and allows the steps to appear accurately in the journal or in the main library at almost instantaneously. Calculations made by computers or calculators are also suitable for eliminating human errors.
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