bank statements, checks, purchase orders, timecards and statements of account.

Specimens and discussions on some of these documents will be in Chapter 7.

ACCOUNTING CYCLE

The accounting cycle refers to a series of sequential steps or procedures performed to

accomplish the accounting process. The steps in the cycle and their aims follow:

Step 1 Identification of Events to be Recorded

Aim: To gather information about transactions or events
During the
generally through the source documents.
accounting Step 2 Transactions are Recorded in the Journal
period
Aim: To record the economic impact of transactions on the
firm in a journal, which is a form that facilitates transfer to
the accounts.
Step 3 Journal Entries are Posted to the Ledger
Aim: To transfer the information from the journal to the
ledger for classification.
Step 4 Preparation of a Trial Balance
Aim: To provide a listing to verify the equality of debits and
credits in the ledger.
Step 5 Preparation of the Worksheet including Adjusting Entries
Aim: To aid in the preparation of financial statements.
Step 6 Preparation of the Financial Statements
At the end
Aim: To provide useful information to decision-makers.
of the Step 7 Adjusting Journal Entries are Journalized and Posted
accounting Aim: To record the accruals, expiration of deferrals,
period estimations and other events from the worksheet.
Step 8 Closing Journal Entries are Journalized and Posted
Aim: To close temporary accounts and transfer
profit to
owners equity.
Step 9 Preparation of a Post-Closing Trial Balance
Aim: To check the equality of debits and credits after the
closing entries.
At the start
start
of the next
Step 10 Reversing Journal Entries are Journalized and Posted
Aim: To simplify the recording of certain regular
period
in the next accounting
transactions
period.
Ihis cycle is repeated each accounting period. The first three steps in the
accounting
cycle are accomplished during the
period. The fourth to the ninth steps generally occur
at the end of the
period. The last step is optional and occurs at the beginning of the
next period.