The Accounting Cycle
Essay Preview: The Accounting Cycle
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The accounting cycle consists of 8 procedures. The first procedure is journal entries, ledger accounts, unadjusted trial balance, adjusting entries, adjusted trial balance, financial statements, closing entries and the final procedure is post-closing trial balance. I currently am not employed so I currently do not participate in any of the following accounting procedures.
The first procedure is journal entries the purpose of this procedure is to analyze all events so the recorder will know what needs to be recorded then the recorded will classify them so that all transactions may be recorded appropriately. The recorder must decide if an event is measurable enough and if it is relevant and reliable enough to be recorded. Sometimes there will be events that will increase assets of said business these events will not be able to be recorded most of the time due to not all assets are measurable. Management will usually make these decisions.
The second procedure is ledger accounts the purpose is to enter the correct transactions in the appropriate journal periods. This procedure would be to take each journal entry and assign it to each asset, liability, equity, expense or revenue account(s) to debit and/or credit. This procedure should usually be performed by the accounting department.
The third procedure would be to post the ledger this procedure is normally performed by the book keeper or at least it will be supervised by the book keeper. Before the journal entries are able to be posted they must be reviewed by a bookkeeper to ensure their accuracy. The person who is responsible for entering them is instructions by the bookkeeper to make any corrections if necessary or they are told to post the journal entries to the ledger.
The fourth procedure is to create an unadjusted trail balance which will contain a list of accounts that entails credit and debit balances with their totals and they should be equal. If for any reason they are not equal then there an error has occurred somewhere along the way. The bookkeeper is then one who is responsible for uncovering any errors and correcting them.
The fifth procedure will be to adjust entries. When adjusting journal entries each entry will fall into one of four categories: prepaid expenses, unearned revenues, accrued revenues and accrued expenses. These adjusted journal entries are normally prepared then recorded by the book keeper or anyone in a higher position such as management. In some rare instants a department supervisor will submit the information that needs to be recorded however the accounting department will always be responsible for making the adjustments.
The sixth procedure is to adjust the trial balance. The main point of adjusting the trial balance is somewhat the same concept as the unadjusted trial balance. However they differ between the two in the sense that all of the events for a specific period will be recorded. The adjusted trail balance