The Nine Steps of Accounting Cycle CheckPoint
Step 1 in the accounting process is to analyze the transactions. This would include revenue, expenses, etc., anything that the company received or paid during the time period.
Step 2 is to journalize these transactions. To take the information and correctly post each transaction with a debit and credit line item.
Step 3 is to post the journal information into an accounting ledger that shows all of the line items as totals in their respective accounts.
Step 4 is to prepare an unadjusted trial balance. This would list all balances at the specific point in time. This is a good time to review all transactions and line totals.
Step 5 is to adjust the entries. This would involve adjusting the amounts accordingly at the end of the time period; revenue and expense to assets and liabilities.
Step 6 is the preparation of the adjusted trial balance. A review of the adjusting entries and the unadjusted trial balance is reviewed to verify that the information is correct and any errors can be revised.
Step 7 is to prepare the four financial statements, pulling the information from the above steps. This information would have been edited as needed by using the unadjusted trial balance and any adjusting of the entries.
Step 8 is to prepare the closing entries. This step is to close out the books and prepare them for the next time period.
Step 9 is to prepare the post closing trial balance. This would contain the permanent accounts, and would verify that the reporting is correct, and that the debits and credits are equal. It will confirm that temporary accounts have a zero balance and are ready for the next time period. If they were not a zero balance, then reversing entries would need to be performed at this time.
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