Accounting Cycle

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:

  1. Transactions are analyzed and recorded in the journal.
  2. Transactions are posted to the ledger.
  3. An unadjusted trial balance is prepared.
  4. Adjustment data are assembled and analyzed.
  5. An optional end-of-period spreadsheet is prepared.
  6. Adjusting entries are journalized and posted to the ledger.
  7. An adjusted trial balance is prepared.
  8. Financial statements are prepared.
  9. Closing entries are journalized and posted to the ledger.
  10. 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.

One thought on “Accounting Cycle

Leave a Reply

Your email address will not be published. Required fields are marked *