Question

List the Accounting Cycle steps in the order of which they must be completed. All of the documents and reports are completed internally by the accountants, and only one of the steps produces reports that are for external users. Which documents or reports are prepared for external users, and who are the external users?

Answer 1

List of accounting cycle steps :-

1. Transactions :-

Transactions are the first step of the accounting cycle. Financial transactions should be recorded, if there is no financial transactions then there is nothing to keep track off. Transactions include purchase of assets, purchase of inventory, sales, debts.

2. Journal entries :- when transaction sitting place the next step is to record these transactions into interest in companies journal in chronological order by debiting account and crediting accounts and both the debits and credits should be balance.

3. Posting :- the journal entries are posted to general ledger where a summary of all the transactions of a individual accounts can be seen.

4. Trail balance :- at the end of accounting period total of each and every particular account or ledger will be calculated and presented all the balances of all ledger accounts in trial balance.

5. Work sheets :- if there is any mismatches in the trial balance then the the accountant should verify for the errors and rectify the errors if any detected.

6. Adjustment entries :- at the end of the the financial year or before closing of the books The adjustment entries were passed to balance some of the accounts.

7. Financial statements :- balance sheet, income statement and cash flow statement will be prepared by using correct balances.

8. Closing the books :- all the revenues and expenses accounts were closed and make zero balance for the beginning of next financial year.reason for closing all revenue and expenses accounts are these type of accounts shows the performance of organisation for a particular period. And the accounts which were taken into balance sheet will not be closed because the accounts in balance sheet will represent the financial position of the organisation.

The documents and reports preapred for external users are Financial statements which are preapred by accountants in step - 7 of accounting cycle.

External users :- these are the persons who are are from outside of the entity uses the accounting information of a particular organisation or company.

Examples for external users :-

1. Suppliers

2. Banks

3. Investors

4. Customers

5. Government

6. General public

These all the information required to solve the above given question.

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