Accounting Cycle

The accounting cycle is a collective process of identifying, analyzing, and recording the accounting events of a company. The following steps is involved in the accounting process:

• Identifying the financial transactions
• Making entries in the books of journal
• Posting into ledger
• Preparing unadjusted trial balance
•  Giving effect to  adjusting entries
• Preparing adjusted trial balance
• Preparing financial statements such as Trading account, Profit and loss account and balance sheet
• Making closing entries

Thus the accounting cycle is a multi-step process that analyses and records your financial data. The process starts when a transaction occurs, and finishes when that transaction is included in the financial statements.  All these tasks are completed one after another.  That’s why it is called an accounting cycle.

The pictorial representation of an accounting cycle  is also presented which made it clear  as to how the entire process of accounting works from the stage of  identifying and recording of financial transactions  in the books of original entry till post closing the trial balance.