The accounting cycle is a series of steps followed by accountants to track financial transactions and prepare financial statements. The steps include:
Identifying Transactions: Recognizing and documenting financial transactions as they occur. Recording Transactions: Entering transactions into journals using double-entry system. Posting to Ledger: Transferring journal entries to the general ledger accounts. Preparing Trial Balance: Summarizing the ledger accounts to ensure that debits equal credits. Adjusting Entries: Making necessary adjustments for accrued and deferred items. Preparing Financial Statements: Compiling the adjusted trial balance into financial statements. Closing Entries: Closing temporary accounts to prepare for the next accounting period.