Accounting Cycle

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What is the 'Accounting Cycle'

The accounting cycle is the name given to the collective process of recording and processing the accounting events of a company. The series of steps begin when a transaction occurs and end with its inclusion in the financial statements. The nine steps of the accounting cycle are:

  1. Collecting and analyzing data from transactions and events.
  2. Putting transactions into the general journal.
  3. Posting entries to the general ledger.
  4. Preparing an unadjusted trial balance.
  5. Adjusting entries appropriately.
  6. Preparing an adjusted trial balance.
  7. Organizing the accounts into the financial statements.
  8. Closing the books.
  9. Preparing a post-closing trial balance to check the accounts.

Also known as "bookkeeping cycle".

BREAKING DOWN 'Accounting Cycle'

The accounting cycle is a methodical set of rules to ensure the accuracy and conformity of financial statements. Computerized accounting systems have helped to greatly reduce mathematical errors in the accounting process, but the uniform process of the accounting cycle also helps reduce mistakes.

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RELATED FAQS
  1. Why is an accounting cycle necessary?

    Find out why it is important for a company to identify and follow an accounting cycle, and how proper accounting helps the ... Read Answer >>
  2. Which accounting cycle is best for my business?

    Read about the different types and interpretations of accounting cycles, and why all businesses should modify the generic ... Read Answer >>
  3. What are the most important steps in the accounting cycle?

    Understand the steps in the accounting cycle. Learn about each of the eight steps in the accounting cycle and why each one ... Read Answer >>
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    Understand what would happen if a company or accounting department tried to skip steps in the accounting cycle. Learn why ... Read Answer >>
  5. What's the difference between a trial balance and an adjusted trial balance?

    See the difference between a trial balance and an adjusted trial balance, and understand the importance of making the appropriate ... Read Answer >>
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    Learn about the principle objectives of financial accounting, including the furnishing of the financial statements for those ... Read Answer >>
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