accounting cycle steps

1

Use source documents to identify accounts affected by external transactions.
(Example: Receiving an invoice or sales receipt.)

2

Analyze the impact of the transaction on the accounting equation.
(Assets = Liabilities + Equity; determine how accounts are affected.)

3

Assess whether the transaction results in a debit or a credit to the account balance.
(Apply double-entry rules: e.g., debiting Cash, crediting Revenue.)

4

Record the transaction in the journal (journal entry).
(Formal recording with dates, accounts, and amounts.)

5

Post the transaction to the T-accounts in the general ledger.
(Transfer journal entries to ledger accounts.)

6

Prepare an unadjusted trial balance.
(List all account balances to check for debits = credits.)

7

Record and post adjusting entries.
(Update for accruals, deferrals, depreciation, etc.)

8

Prepare financial statements.
(Income statement, balance sheet, etc., using the adjusted balances.)

9

Record and post closing entries.
(Reset temporary accounts like Revenue/Expenses to zero for the next period.)