Transactions are one type of business event. Transactions may or may not necessitate an accounting entry to occur. Examples of transactions that do not require an accounting entry are placing an order with a vendor, hiring an employee, or changing an interest rate. Examples of transactions that do require an accounting entry are receiving goods from a vendor, selling goods to a customer, paying employees, and borrowing money. Notice that these accounting transactions focus on an exchange of economic value between the company and another party (vendor, customer, employee, creditor), and they will result in an update to the accounting records of a company (Herron 2000). This paper will define what accounting Cycle is, what the primary objectives are and the series of steps that it consist of and their responsibility.
What is accounting cycle?
The accounting process is a series of activities that begins with a transaction and ends with the closings of books. Because this process is repeated each reporting period, it is referred to as the accounting cycle and it includes some major steps.
The primary objectives of the accounting function in an organization are to process financial information and to prepare financial statements at the end of the accounting period. Companies must systematically process financial information and must have staffs that prepare financial statements on a monthly, quarterly, and/or annual basis. To meet these primary objectives, a series of steps is required. Collectively these steps are known as the accounting cycle. The steps, applicable to a manual accounting system, are described below. Later, there will be a brief discussion of a computerized processing system (Answers.com)
Steps accounting cycle consists of
The accounting cycle consists of nine steps and what each step is responsible for: 1.Collect and analyze -- As transactions and events related to financial...