accounting cycle

Definition of 'Accounting Cycle'

The name given to the collective process of recording and processing the accounting events of a company. The series of steps begin when a transaction occurs and end with its inclusion in the financial statements. The nine steps of the accounting cycle are:

1. Collecting and analyzing data from transactions and events.
2. Putting transactions into the general journal.
3. Posting entries to the general ledger.
4. Preparing an unadjusted trial balance.
5. Adjusting entries appropriately.
6. Preparing an adjusted trial balance.
7. Organizing the accounts into the financial statements.
8. Closing the books.
9. Preparing a post-closing trial balance to check the accounts.

Also known as “bookkeeping cycle”.

Definition of 'Accounting'

To provide a record such as funds paid or received for a person or business. Accounting summarizes and submits this information in reports and statements. The reports are intended both for the firm itself and for outside parties.

Definition of 'Trial Balance'

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns. A company prepares a trial balance periodically, usually at the end of every reporting period. The general purpose of producing a trial balance is to ensure the entries in a company's bookkeeping system are mathematically correct.

Journal:

Transactions are recorded daily in journal and hence it has been named so. It is a book of original entry to record chronologically (i.e. in order of date) and in detail the various transactions

 

Date (1)	Particulars (2)	L.F. (3)	Dr. Amount	Cr. Amount

 

 

 

Date	Particulars	L.F	Debit	Credit
Jan. 1	Cash Account          ...Dr.		20,000
	To Capital Account			20,000
	(Capital introduced)
Jan 2.	Building Account       ...Dr.		8,000
	To Cash Account			8,000
	(Building purchased for cash)
Jan. 8	Purchases Account   ...Dr.		1,000
	To Sales Account			1,000
	(Goods purchased on credit form C)
Jan. 15	Cash Account          ...Dr.		500
	To Sales Account			500
	(Goods sold for cash)
Jan. 20	C                           ...Dr.		100
	To purchases Returns Account			100
	(Goods returned to C)
Jan. 22	R                           ...Dr.		400
	To Sales Account			400
	(Goods sold on credit)
Jan. 25	Sales returns Account ..Dr.		25
	To R			25
	(Goods returned by him)
Jan. 31	Salaries Account        ...Dr.		200
	To Cash Account			200
	(Salaries paid)
Jan. 31	Rent Account            ...Dr.		150
	To Cash Account			150
	(Rent paid in cash)
	Total		30,375	30,375

 

 

Ledger:

 

The ledger is a book which contains a condensed and classified record of all the pecuniary transactions of the business generally brought, transferred or posted from the books of original entry.

 

 

 

 

 

'Trial Balance'

 

Definition of an Accounting Worksheet

An accounting worksheet is a ledger sheet that lists all the balances of each account a business has on a certain date. An accounting worksheet is done at the end of an accounting period, and it is used to make adjustments to accounting entries, to close entries and finally to prepare financial statements.

 

 Final account

 he preparation of the final accounts is not the first stage of an accounting cycle but they are the final products of the accounting cycle, that is why, they are called final accounts.