March 6, 2012
Nine Steps of the Accounting Cycle
Screen Shot 08 March 2012
The nine steps of the accounting cycle ae generally described as follows. These steps are designed to follow a logical sequence to record transactions and prepare financial statements, and begins with transaction analysis and ends with closing of the books.
Step 1.Collect and analyze the transactions and determine their effect on the financial position of the company. Step 2.Journalize transactions into the general journal, also known as the book of original entry. Step 3.Post to the general ledgers which are organized by account. Step 4.Prepare an unadjusted trial balance to ensure that debits and credits are indeed equal. Step 5.Prepare adjustments to bring accounts to their proper balances after due consideration of transactions or events not previously entered. Step 6.Prepare an adjusted trial balance to check the equality of the debits and credits. Step 7.Prepare financial statements using the corrected balances from the adjusted trial balance. Step 8.Close the accounts by giving them zero balances as the end of the period. Step 9.Prepare a post-closing trial balance to ensure that all revenue and expense accounts have been closed properly and to once again check the equality of the debit and credit balances of all the balance sheet accounts.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial accounting (6th ed.). Hoboken, NJ: Wiley.