There are 9 steps in the accounting process cycle: 1) identifying transactions, 2) recording in journals, 3) posting to ledgers, 4) preparing an unadjusted trial balance, 5) making adjusting entries, 6) preparing an adjusted trial balance, 7) creating financial statements, 8) making closing entries, and 9) preparing a post-closing trial balance. The process ensures all financial transactions are properly recorded and reported on financial statements in accordance with accounting principles.
There are 9 steps in the accounting process cycle: 1) identifying transactions, 2) recording in journals, 3) posting to ledgers, 4) preparing an unadjusted trial balance, 5) making adjusting entries, 6) preparing an adjusted trial balance, 7) creating financial statements, 8) making closing entries, and 9) preparing a post-closing trial balance. The process ensures all financial transactions are properly recorded and reported on financial statements in accordance with accounting principles.
There are 9 steps in the accounting process cycle: 1) identifying transactions, 2) recording in journals, 3) posting to ledgers, 4) preparing an unadjusted trial balance, 5) making adjusting entries, 6) preparing an adjusted trial balance, 7) creating financial statements, 8) making closing entries, and 9) preparing a post-closing trial balance. The process ensures all financial transactions are properly recorded and reported on financial statements in accordance with accounting principles.
There are 9 steps in the accounting process cycle: 1) identifying transactions, 2) recording in journals, 3) posting to ledgers, 4) preparing an unadjusted trial balance, 5) making adjusting entries, 6) preparing an adjusted trial balance, 7) creating financial statements, 8) making closing entries, and 9) preparing a post-closing trial balance. The process ensures all financial transactions are properly recorded and reported on financial statements in accordance with accounting principles.
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Accounting Process Cycle.
There Are 9 steps to be followed
1.Identifying and Analyzing Business Transactions The accounting process starts with identifying and analyzing business transactions and events.
Not all transactions and events are entered into the
accounting system. Only those that included to the business environment are included in the process.
For example, a personal loan made by the owner that
does not have anything to do with the business is not accounted for. 2. Recording in the Journals.
Journals are also known as Books of Original
Entry.
A journal is a book – paper or Computer in
which transactions are recorded.
Business transactions are recorded using the
double-entry bookkeeping system. 3. Posting to the Ledger.
Also known as Books of Final Entry, the ledger
is a collection of accounts that shows the changes made to each account as a result of past transactions, and their current balances. After the posting all transactions to the ledger, the balances of each account can be determined. 4. Unadjusted Trial Balance.
A trial balance is prepared to test the equality
of the debits and credits. All account balances are extracted from the ledger and arranged in one report. Afterwards, all debit balances are added. All credit balances are also added. Total debits should be equal to total credits. 5. Adjusting Entries.
Adjusting entries are prepared as an
application of the accrual basis of accounting. At the end of the accounting period, some expenses may have been incurred but not yet recorded in the journals. Some income may have been earned but not entered in the books. 6. Adjusted Trial Balance.
An adjusted trial balance may be prepared
after adjusting entries are made and before the financial statements are prepared.
This is to test if the debits are equal to credits
after adjusting entries are made. 7. Financial Statements.
When the accounts are already up-
to-date and equality between the debits and credits have been tested, the financial statements can now be prepared.
The financial statements are the end-
products of an accounting system. 8. Closing Entries.
Temporary or nominal accounts, income
statement accounts, are closed to prepare the system for the next accounting period. Temporary accounts include income, expense, and withdrawal accounts. These items are measured periodically. 9. Post-Closing Trial Balance.
In the accounting cycle, the last step is to
prepare a post-closing trial balance. It is prepared to test the equality of debits and credits after closing entries are made. Since temporary accounts are already closed at this point, the post-closing trial balance contains real accounts only. 10. Reversing Entries (It Is Optional Step) Reversing entries are optional. They are prepared at the beginning of the new accounting period to facilitate a smoother and more consistent recording process.
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