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The Accounting Cycle

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Accounting cycle can be defined as a sequence or process that is involved in completing the accounting process. Accounting cycle also refers to traditional procedures that performed by the company in order to record all the business transactions during the accounting periods. There are several sequences includes in the accounting cycle such as identifying, collecting and analyzing documents and business transactions, records the process in journals, posting the journalized amounts to ledger, preparing the trial balances and financial statements. Usually, an accounting cycle of the company begins when a business transaction take place and finishes the accounting cycle when the financial statements are prepared. The period of the accounting …show more content…

Based on the diagram above, the first step of the accounting cycle is analyzing the business transactions. The accounting cycle starts with identifying and analyzing the business transactions taken place. It is important to identify the business transactions that take place. Furthermore, not all the events are recorded in the accounting system. The company must identified the transactions that are related to the business are recorded in the accounting system. For example, a business transaction is occurred when the company purchased a motor vehicle. As a result, the event was identified and the new asset purchased should be added to the accounting …show more content…

An adjusted trial balance is a listing of the company accounts that will appear on the financial statements after the adjusting journal entries have been made. Preparing an adjusted trial balance is the last step before financial statements can be produced. The format of the adjusted trial balance is exactly like the unadjusted trial balance. The adjusted trial balance is presented by using the three columns and the ending balance for both debits and credits must be equal.

After preparing the adjusted trial balance, the accounting cycle will continue with preparing the financial statements. Preparing the financial statements is the most important steps in the accounting cycle. Balance sheet, income statement, statement of changes in equity and statement of cash flows will be prepared in order to provide useful financial information to the external users. The income statement or known as profit and loss statement is a report that display the income and expenses of the company during the accounting period. The income statement also served to calculate the net income or loss of a company by deducting the total expenses from the total income and this calculation shows investors and creditors the overall profitability of the company as well as how efficiently the company is at generating profits from total

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