Essay About Series Of Steps And Accounting Cycle

Accounting Cycle Paper
Essay Preview: Accounting Cycle Paper
Report this essay
Accounting Cycle Paper
Accounting is a informational finance system designed to record, classify, report, and interpret financial data. The accounting cycle is a series of steps that accountants use to keep necessary accounting records and prepare financial statements. There are eight basic steps in the accounting system, which are: (1) measuring and identifying transactions and other events; (2) journalizing; (3) posting; (4) doing an unadjusted trial balance; (5) putting in adjusted entries; (6) doing an adjusted trial balance; (7) doing financial statements; and (8) closing. The first step of the accounting cycle is the analysis of transactions and other events that has been selected. There are two types of events external events and internal events. Transactions are an example of an external events. Machinery operations is an example of internal events. The second step is journalizing, which is when a company records accounts in transactions and events that affect the companys assets, liabilities, and equities. Posting is the third step of the accounting cycle and is the posting of all the companys assets, liabilities, and stockholders equity accounts, which is posted in the general ledger. A general ledger entry consists of four parts: the amounts to be debited and the accounts, the amounts to be credited and the accounts, the explanation, and the date. A company enters debits first, followed by the credits. Next is the unadjusted trial balance, (step four) which is done to make sure the books are in balance and if a mistake is found you can make corrections. Step five is making the adjusted entries and when the correct adjusted entries has been made the books will be in balance. Step six is preparing an adjusted trial balance or trial balance. The trial balance is done when the accounting period ends, which may be done monthly, quarterly, or yearly. Preparing financial statements (step seven) is done after you have corrected the account balances in the previous steps and then prepare a balance sheet and income statement. The financial statement includes: income statement which is gathered from the revenues, losses, expenses, and gains, the balance sheet drawn from the equity accounts, liabilities, and assets. The balance sheet has to always balance, the statement of retained earnings gets the information from dividends and net income, and the cash flow statements information is from the other company financial statements. Closing the books is the