The Accounting Cycle
AB114-02 Accounting I
Professor Richard Franchetti
April 8, 2013
THE ACCOUNTING CYCLE
The accounting cycle begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period. There are ten steps one must follow in the accounting cycle.
The first step in the accounting cycle is to analyze and record transactions in the journal using the double entry-accounting system. During this step you have to read the description of the transaction carefully and determine whether an asset, liability, owner’s equity, revenue, expense, or drawing account is affected. For each account that is affected by the transaction you have to determine if the account increases or decreases. You will decide if it will be recorded as a debit or credit. Once you have made your decision you will record the transaction in a journal entry.
The second step you will be posting transactions to a ledger. The transactions recorded in the journal are now posted to the accounts in a ledger. The debits and credits for each journal entry are posted to the accounts in the order which they occurred. When posting in the journal be sure to post the date in the date column and the amount in the credit or debit column. You may also use a posting reference number when journalizing.
Step three you will prepare an unadjusted trial balance. The unadjusted trial balance is prepared to determine whether any errors have been made in posting the debits and credits to the ledger. The unadjusted trial balance does not provide complete proof of the accuracy of the ledger. It indicates only that the debits and credits are equal. This process is very valuable because errors often affect the equality of debit and credits. If the two balances of a trial are not THE ACCONTING CYCLE
equal an error has occurred and must be found...
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