An accounting cycle is a systematic process of recording, classifying and summarizing business activities / transactions, so that the accounting information can be transformed into a more readable / understandable format for internal as well as external users of accounting information. That format is simply called a financial statement. In this article I will try to elaborate this process step by step using images and figures. I will try to make it as simple as possible that a layman can understand this process easily. Let’s start!

After reading this article you will be able to:

Flow Chart

Following flow chart demonstrates the steps needed to create formal financial statements and complete the accounting cycle.

General journal Flow Chart Step 1General Ledger Flow Chart Step 2Trial Balance Flow Chart Step 3

Income Statement Flow Chart Step 4Balance Sheet Flow Chart Step 5Post Closing Trial Balance Flow Chart Step 6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continue to Step 1


Additional Information

Debits and Credits

Chart of Accounts

Defining Accounts