Accounting Cycle

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. Therefore, Accounting Cycle is a 6 step process of preparing financial statements. 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 flowchart demonstrates the steps needed to create formal financial statements and complete the accounting cycle. Click on any step from 1 to 6 or Continue from below.

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 Related to Accounting Cycle:
  • What are Debit and Credit? Read to know: Most of the readers get confused when an accountant debit and credit transactions. Readers who don’t have accounting background ( even with little accounting background) generally think that a debit meaning an increase in the account and a credit meaning a decrease in the account. This is totally wrong thinking…
  • Chart of Accounts: A list showing the total number of accounts used by an organization is known as a chart of accounts. Different businesses have different types of accounts and the different number of accounts. Small organizations may have one or two thousand number of accounts but a big organization may have hundred thousand accounts.
  • Define Account: Distinctive sorts of organizations use diverse sorts of accounts. For instance, a manufacturing business will require different records for reporting manufacturing costs. A retail business, notwithstanding, will have accounts for the purchases of finished goods…
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