The Accounting Cycle consists of a number of processes that are performed at different times within a defined time frame. The accounting cycle may be performed at different times depending on the needs and requirements of the company/organisation. There are ten steps to the cycle. These steps are: Step 1 refers to analysing transactions. Step two is journalizing. Step three involves posting. Step four involves preparing an unadjusted balance. Step five consists of adjusting. Step six involves preparing an adjusted balance. Step seven consists of preparing financial statement. Step eight entails closing. Step nine consists of creating a postclosing trail balance. Step ten consists of going back. This paper will provide an overview on financial statements and discuss the accounting cycles.
Accounting cycles were originally developed for accountants who did not have the access to modern software. Many of the available accounting software programs let users complete multiple steps within the accounting cycle, or even do them in different order. These steps are still based on the same principles. Students and financial professionals who are pursuing business-related studies still need to know the accounting cycle. A company must have all documents that can be used to analyze transactions such as receipts, checks, and receipts. In order to journalize transactions, one must identify which accounts are affected by the transaction. Then, correctly record the transaction. Journalizing transactions requires that the accountant uses double entry accounting. Preparing the trial balances is necessary to verify that the numbers entered match the actual results. Accounting is a complex system that requires balances and checks to ensure accurate reporting. In order to ensure transparency and accuracy in company financial statements, there are a variety of checks and balances that can be used. Inadvertently leaving a step out or skipping a step can cause data to be inaccurate. Key components may also be missing. You must include steps in order for accurate balances to be available and for financial transparency. Inaccuracies and quantitative discrepancies could result in poor performance, an audit that fails, or even lawsuits. To assess the company’s financial health, all stakeholders must look at its financial statements. The accounting steps or figures are not reported accurately by stakeholders such as customers, executives, and owners to help them make informed decisions about the company’s health.
The accounting cycle includes the balance sheet, cash flow statement and income statement. All of these statements are important because they serve different purposes. These statements are used to assess the company’s finances, such as sales, profits and expenses. For a company’s success and profitability, it must be able evaluate its financial health. These statements are necessary for funding as well as to keep the business afloat. These statements will suffer if the accounting cycles are not strictly followed.
There are ten steps to the accounting cycle, which must be followed. The accounting cycle must be followed strictly to avoid missing journal entries, ineffective reconciles, false trial balances or income and expense reporting. Incorrect balance reporting can lead to over-spending, missed opportunities, and possible litigation. The accounting cycle allows for the creation of financial statements such as the balance, income, and cash flows.
