Business, 24.01.2022 01:40 hilario4785

List the accounting cycle and there meaning

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Answer from: Kigarya

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Eight Steps Of Accounting Cycle

1. IDENTIFY TRANSACTION: An organization begins its accounting cycle with the identification of those transactions that comprise a bookkeeping event. This could be a sale, refund, payment to a vendor, and so on.

2. RECORD TRANSACTIONS IN A JOURNAL: Next comerecording of transactions using journal entries. The entries are based on the receipt of an invoice, recognition of a sale, or completion of other economic events.

3. POSTING: Once a transaction is recorded as a journal entry, it should post to an account in the general ledger. The general ledger provides a breakdown of all accounting activities by account.

4. UNADJUSTED TRAIL BALANCE: After the company posts journal entries to individual general ledger accounts, an unadjusted trial balance is prepared. The trial balance ensures that total debits equal the total credits in the financial records.

5. WORKSHEET: Analyzing a worksheet and identifying adjusting entries make up the fifth step in the cycle. A worksheet is created and used to ensure that debits and credits are equal. If there are discrepancies then adjustments will need to be made.

6. ADJUSTING JOURNAL ENTRIES: At the end of the period, adjusting entries are made. These are the result of corrections made on the worksheet and the results from the passage of time. For example, an adjusting entry may accrue interest revenue that has been earned based on the passage of time.

7. FINANCIAL STATEMENTS: Upon the posting of adjusting entries, a company prepares an adjusted trial balance followed by the actual formalized financial statements.

8. ClOSING THE BOOKS: An entity finalizes temporary accounts, revenues, and expenses, at the end of the period using closing entries. These closing entries include transfering net income into retained earnings. Finally, a company prepares the post-closing trial balance to ensure debits and credits match and the cycle can begin anew.

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