Accounting Cycle Written Assignment
The accounting cycle is a series of steps in the accounting process for all business activities during an accounting period. There are ten steps to this accounting cycle that you must follow. Step one – Analyze. Step two – Journalize. Step three – Post. Step four – Prepare unadjusted trial balance. Step Five – Adjust. Step six – Prepare adjusted trial balance. Step seven – Prepare financial statements. Step eight – Close. Step nine – Prepare a post-closing trial balance. Step ten – Reverse. The accounting cycle is used to record transactions that occur between two businesses or entities. When you are using the accounting cycle it is important to know when the steps occur and how often. You can encounter steps 1 through 3 more often than steps 4 through 10. The accounting cycle is very important because it makes it easier to put together a business’s financial statements that are accurate, current, and reflect Generally Accepted Accounting Principles (GAAP).
When you first start you accounting cycle you will start with step one which is analyzing the business transactions. The business transactions have to be analyzed because you have to know if the transaction needs to be written in the journal. When you have a transaction that involves the exchange of assets, it must be put in the journal. Whatever transactions are put in the journal, the business will need a source document to serve as evidence that the transaction did occur and it is the type of transactions the business can claim. A good source document are checks and purchase orders. An example of a transaction is a retail store selling some of its retail to a consumer. The two accounts that would be affected are Cash and Sales.
After you have analyzed the business transaction you are ready for step two. Step two you will journalize your transactions in a general journal, which is called the book of original entry. You can journalize every transaction during...
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