Question

The accounting cycle consists of 10 steps that companies complete during each accounting period to facilitate the preparation of financial statements. The worksheet is an efficient tool companies use to prepare the adjusted trial balance and a draft of the balance sheet, income statement, and statement of owner’s equity (within the worksheet). Reflect on this week's lecture and assignments.

Explain why following the steps in the accounting cycle is important.

Describe how the worksheet creates an efficient process in the workplace.

Answer 1

Hey,

As you are aware of the 10 steps involved in accounting cycle let me explain to you why this cycle shall be followed step by step with an example. Can I do Posting in General Ledger without passing any Journal Entries? Can I prepare financial statements directly without doing any of the above steps of the cycle? Is it not at all possible? right? Accounting is a process and you cant skip any of the steps. Hope this explanation helps you understand the importance of the steps.

A worksheet in simple terms is a sheet in which we can write pieces of information, perform calculation etc. Every Accountant prepares a worksheet for recording adjusting entries(Eg. Insurance expense done for 2 years shall be properly allocated in two years, the calculation of this will be done in a worksheet). so based on such adjusting entries which is the accountant has done on the worksheet he can easily prepare the adjusted trial balance.

Not only accounting having a worksheet in all day to day activity helps in creating an efficient work environment.