What Is Accounting Cycle And The Steps Involved

It is importance to understand what we mean by an Accounting cycle.

What is Accounting Cycle:

• Is a series of accounting process which begins with the identification of an economic activity or transaction, recording of the economic activity and ends with the preparation of the financial statements.
• The Accounting Cycle is a repeated process where one cycle ends and another cycle (as above) is repeated again
  

Accounting Cycle is actually a very systematic and repeated process which involve the following STEPS:

1. Analyse source documents like invoices, receipts, payment vouchers, etc
2. Record transactions in Journals ( sales journal, purchase journals, etc)
3. Post to ledger accounts
4. Prepare Unadjusted Trial Balance
5. Journalize adjusting entries
6. Post adjusting entries
7. Prepare Adjusted Trial Balance
8. Journalize closing entries
9. Post closing entries
10. Prepare post-closing Trial Balance
11. Prepare financial statements like the Income Statement