Keeping Track of Transactions – The Accounting Cycle
You now know about the bulk of what goes into the accounting cycle (the process that starts with a transaction and ends with ﬁnancial statements). In fact, the entire accounting cycle can be summed up in eight basic steps.
- Write up transactions in the daily journals.
- Post journal entries to the appropriate ledgers.
- Prepare a trial balance of all general ledger accounts.
- Create your working trial balance, complete with adjusting entries.
- Enter those adjusting entries into the general journal and post them to the general ledger.
- Prepare your ﬁnancial statements.
- Close out your temporary accounts.
- Create a postclosing trial balance.
The ﬁve new steps have to do with end-of-period wrap-up. Those steps are designed to give you ﬁnancial statements to analyze and a clean accounting slate to go forward. Then the accounting cycle begins all over.