The accounting process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance is called the accounting cycle. The steps in the accounting cycle are as follows:
- Transactions are analyzed and recorded in the journal.
- Transactions are posted to the ledger.
- An unadjusted trial balance is prepared.
- Adjustment data are assembled and analyzed.
- An optional end-of-period spreadsheet is prepared.
- Adjusting entries are journalized and posted to the ledger.
- An adjusted trial balance is prepared.
- Financial statements are prepared.
- Closing entries are journalized and posted to the ledger.
- A post-closing trial balance is prepared.2
Exhibit 8 illustrates the accounting cycle in graphic form. It also illustrates how the accounting cycle begins with the source documents for a transaction and flows through the accounting system and into the financial statements.
Source: Warren Carl S., Reeve James M., Duchac Jonathan (2013), Corporate Financial Accounting, South-Western College Pub; 12th edition.