What is the Accounting Cycle?
The accounting cycle is series of steps used to collect and process financial information before they can be finally communicated to the statement users. Accountants call it a cycle since they repeat the steps every accounting period. The accounting period is usually a twelve- month period which may end on December 31 in which case it is called a calendar accounting period or it may end on any other month in case it is called a fiscal accounting period.
What are the Steps in the Accounting Cycle?
- Gathering of Documents
- Analyzing and Journalizing of Transactions (Recording)
- Posting to the Ledger (Classifying)
- Trial Balance Preparation
- Preparation of a Worksheet (for Adjustments and Financial Statements)
- Preparation of Financial Statements
- Journalizing and Posting of Adjustments
- Journalizing and Posting of Closing Entries
- Preparation of Post Closing Trial Balance
- Journalizing and Posting of Reversing Entries