THE ACCOUNTING CYCLE
The accounting cycle is a process developed by accountants for the publication of financial statements . The accounting cycle includes several steps for recording and processing and reporting transactions. Each stage is divided into an accounting period , but the accounting cycle must occur at least once during a financial year. The process is repeated from exercise to exercise. At each stage of the process, the amount of information is grouped together in order to reduce the information processing work.
The accounting cycle includes the following elements:
- Registration and registration of transactions.
- Journal entries.
- The posting in the general ledger.
- The trial balance before adjustment.
- Regularization of accounts.
- The trial balance after adjustment.
- Financial statements .
- Closing of accounts.
- Trial balance after closing.
- Reverse entries.
The accounting cycle is briefly presented in the figure below.
SIMPLE ILLUSTRATION OF THE ACCOUNTING CYCLE WITH A BALANCE SHEET TRANSACTION
The example represents a transaction and its path through the accounting cycle.
Recording of the transaction in a journal
Posting in ledgers
Establishment of the trial balance of accounts
Regularization and correction of accounts
No adjusting entry in this example
Establishment of the spreadsheet
Preparation of financial statements
The balance sheet
The cash flow statement
Closing of accounts
No closing entry
Establishment of the trial balance after closing the accounts