Question

1. Which step is your least favorite part of the accounting cycle and why?
2. Which step is your favorite part of the accounting cycle and why?
3. Why do the financial statements need to be prepared BEFORE you journalize and post closing entries?

Answer 1

There are eight steps in an Accounting Cycle.

1. Identify the transaction

2. Record the transaction in Journal

3. Posting to ledger

4. Unadjusted trial balance

5. Worksheet

6. Adjusting journal entries

7. Financial statements

8. Closing the books

Among the above eight, my favourite part of Accounting Cycle is last two steps. That is where financial statements are prepared and books are closed. Because rather than the other steps, this is the phase that involves alot of decision making and professional application in the point of an accountant. These two phases involves alot of compliance with Accounting standards, laws and regulations, analysis of financial ratios and so on.

And the least favourite among the four is posting of balances to ledgers. Because the same is just classification to corresponding T accounts, which is almost a clerical job. Professionals should be more focused on the analytical jobs rather than clerical jobs. Posting can also be enabled auto mode by using system and technology.

Though the Accounting Cycle is in such an order where Financial statements are prepared after journalising entries and posting to ledger, it's always better to prepare the financial statements format first and then start journalising and ledger posting inorder to avoid redundancy. Ittu make the job more easier.