Accounting Cycle

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What is The accouting cycle?

The accounting cycle is the process of gathering, preparing, analysing and reporting the activities of the business during one accounting period so that business and other decisions can be made.

Step 1

Collect and analyse infomation from source documents

Step 2

Journalise transactions

Step 3

post transaction to ledger accounts

Step 4

Prepare a trial balance

Step 5 (2 stages)

1. Journalise and post adjusting entries -balance day adjustments
2. Prepare and adjusted trial balance

Step 6

Prepare financial statements

Step 7 (2 stages)

Close the accounts
1. journalise and post closing entries
2. Prepare a post closing trial balance

Why is the accounting cycle important?

The accounting cycle is important because it gives meaningful comparrisons of operating results during one accounting period and others.

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