Accounting Cycle

Accounting Cycle (Definition)

The accounting cycle is the process of recording and processing all financial transactions of a company, from when the transaction occurs to its representation on the financial statements. It is a step-by-step process of recording, classifying, and summarizing financial transactions over an accounting period.

The typical steps in the accounting cycle are:

1. Identifying and analyzing transactions
2. Recording transactions in the journal
3. Posting transactions to the ledger
4. Preparing an unadjusted trial balance
5. Making adjusting entries
6. Preparing an adjusted trial balance
7. Preparing financial statements
8. Closing temporary accounts
9. Preparing a post-closing trial balance The accounting cycle ensures that all financial transactions are properly recorded and reflected in the company's financial statements, providing an accurate picture of the company's financial position.