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BAF 3M1 Note - Accounting Cycle

The document outlines the steps of the accounting cycle, which includes journalizing transactions, posting to ledger accounts, balancing with a trial balance, making adjustments, completing a worksheet, preparing financial statements, and journalizing adjusting and closing entries. Each step serves a specific purpose, such as ensuring accurate financial reporting and adherence to accounting principles. The cycle is essential for producing useful financial information for decision-making.

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49 views1 page

BAF 3M1 Note - Accounting Cycle

The document outlines the steps of the accounting cycle, which includes journalizing transactions, posting to ledger accounts, balancing with a trial balance, making adjustments, completing a worksheet, preparing financial statements, and journalizing adjusting and closing entries. Each step serves a specific purpose, such as ensuring accurate financial reporting and adherence to accounting principles. The cycle is essential for producing useful financial information for decision-making.

Uploaded by

j.rodriguez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

The Accounting Cycle

STEP THE PROCESS USE REASON


The General
Journalize To record all transactions in one central place (like a
Ongoing, routine activities.

1. Journal financial diary).

Ledger To accumulate transactions by type (i.e. all


2. Post (to the ledger accounts) Accounts
(or T-Accounts)
transactions affecting cash, or sales) to come up
with a total figure for each account.

Trial Balance
3. Balance (using a trial balance on a worksheet) on a worksheet
or off
To check that all our debits equal all our credits.
Performed at the end of the accounting period.

To record late bills, and accrued expenses and


4. Adjustments (enter them on the worksheet) Enter them on
the Worksheet
revenues. It is to ensure the matching, revenue
recognition, and time-period GAAPs are adhered to.

Worksheets are working papers – they allow us to


5. Complete the Worksheet Worksheet
see everything at once and how they relate (i.e. Trial
Balance, Adjustments, Income Statement, and
Balance Sheet).

Prepare Financial Statements Income


Statement and
This is the purpose of Accounting: to produce
6. (Income Statement, then Balance Sheet from Worksheet Balance Sheet
Income Statements and Balance Sheets for the
public (i.e. useful information for decision making).
info) Paper

Journalize Adjusting and The General


Closing entries update the Capital Account by
emptying out the temporary accounts (i.e. Drawings,
7. Journal
Closing Entries Revenues, and Expenses) and resetting them to zero
for the next accounting period

BAF 3M1 Note - Accounting Cycle J. Boulton


October 4, 2006

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