Question

describe the accounting cycle?

Answer 1

The accounting cycle is a process of steps taken to present financial information accurately.

The following steps are involved in the accounting cycle:

i) Analysis of transactions: First step in the accounting cycle is to analyze the transactions and their effect.

ii) Making journal entries: Preparation of a journal is necessary to record the necessary transactions.

iii) Posting in ledger: Third step would be to post entries from the journal to ledgers.

iv) Preparation of Trial Balance: Next step is to prepare a trial balance to check errors.

v) Making necessary adjustments: Make adjusting entries so that income is not overstated and expenses not understated.

vi) Preparation of Adjusted Trial Balance: Prepare a new trial balance after making adjustments.

vii) Preparation of the financial statements like income statement, balance sheet, etc.

vIiI) Closing entries: To close the temporary accounts like revenues account, expenses account, etc.

ix) Preparation of post-closing trial balance: To create the final trial balance for verfication.