ACCOUNTING CYCLE 

JAMAICA E. ESPINO
11- ABM 102

DEFINITION OF ACCOUNTING CYCLE:

This is a series of steps used by an accounting department to document and report a
company's financial transactions.

STEPS IN ACCOUNTING CYCLE:

1. Identify transactions
Business transactions are any financial activities where there is an exchange of money
Examples of transactions: Products sales Liability payments

2. Records transactions as journal entries

A running list of financial activities like a checkbook. To do this, create journal
entries.

3. Post entries to the General ledger

Summarizes all of your business transactions

FIVE MAIN ACCOUNT TYPES OF LEDGER:

 Assets
 Liabilities
 Equity
 Revenue/ income
 Expenses

4. Prepare an unadjusted trial balance 

An unadjusted trial balance shows you whether your balance match.

5. Look for reason for an imbalance

Looks for errors and identifying unadjusted entries so you can make adjustments and
balance your books.

6. Make adjustments 
To make adjustments, simply create new journal entries if applicable.

7. Create financial statements

Compile's your business financial information and show your financial health.

THREE MAIN TYPES OF BUSINESS FINANCIAL STATEMENTS:

 Income statements
 Balance sheets
 Cash flow statement

8. Close your books

CLOSING: the revenue and expense accounts are closed and zeroed out for the next
accounting cycle. This is because revenue and expense accounts are income statement
accounts, which show performance for a specific period
                                                  THE ACCOUNTING CYCLE PART 1

ACCOUNTABLE EVENTS
Not all activities are recorded in the financial statements.

NON- ACCOUNTABLE EVENTS

Business activities that don't affect the financial position of an entity.

EXAMPLES:
 Lay-off of Employees
 Resignation of CEO

We analyze effect of the transaction of the following:

1. ASSET
2. LIABILITIES
3. EQUITY

After identifying and analyzing, transactions will be recorded in book of accounts.

How do we journalize?
We use the double-entry bookkeeping system in journalizing transactions.

Posting
Refers to the transfer of balance from one ledger to the General ledger so as to make it
easy to understand the accounting.

Steps 
1. Create the sub-ledgers and general ledgers with various transactions
2. Create the general ledger
3. Enter the name and account in general ledger with details
4. Enter the debit and credit balances in the ledger
5. Maintain the account for each period separately
6. Correct your errors

UNADJUSTMENT TRIAL BALANCE 

This is listing of all the accounts found in a general ledger. It is usually used as a
starting point for analyzing account balances.