Chapter 1 - Accounting Cycle Steps.pdf - Accounting Cycle 8 Steps in the Accounting Cycle What is the Accounting Cycle The accounting cycle is the

Chapter 1 - Accounting Cycle Steps.pdf - Accounting Cycle 8...

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1 Accounting Cycle 8 Steps in the Accounting Cycle What is the Accounting Cycle?
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2 Steps in the accounting cycle #1 Transactions Transactions: Financial transactions start the process. If there are no financial transactions, there would be nothing to keep track of. Transactions may include a debt payoff, any purchases or acquisition of assets, sales revenue, or any expenses incurred. #2 Journal Entries Journal Entries: With the transactions set in place, the next step is to record these entries in the company’s journal in chronological order. In debiting one or more accounts and crediting one or more accounts, the debits and credits must always balance. #3 Posting to the General Ledger (GL) Posting to the GL: The journal entries are then posted to the general ledger where a summary of all transactions to individual accounts can be seen. (This is where we utilize T-Accounts). The general ledger serves as the eyes and ears of bookkeepers and accountants and shows all financial transactions within a business. Essentially, it is a huge compilation of all transactions recorded on a specific document or an accounting software, which is the predominant method nowadays. For example, if you want to see the changes in cash levels over the course of the business and all their relevant transactions, you would look at the general ledger, which shows all the debits and credits of cash.
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