Accounting Cycle

Definition

The accounting cycle is the sequence of steps that turns business transactions into financial reports for users.

Steps

1. Identify transactions from source (primary) documents.
2. Analyse each transaction for its effects on accounts. See Transaction > Analysis.
3. Record transaction details in the General Journal (GJ).
4. Post general journal entries to General Ledger (GL) accounts.
5. Balance day adjustments.
6. Prepare a Trial Balance of general ledger account balances.
7. Prepare the financial reports (statements) from the trial balance. See Report > Financial Statements.