Jonalyn Servanda

ACCOUNTING CYCLE

Using the accounting cycle, a company may keep track of and calculate its financial
operations. A number of phases are involved in the cycle, each of which relies on prior steps to
gather and organize information. To develop financial accounting systems that fit within their budgets
and provide owners accurate perspectives of their changing situations in competitive marketplaces,
small firms, who do not have full-time accounting teams, depend on the accounting cycle.
The accounting cycle has six major steps:
1. Analyze and record transactions Collect any invoices, bank or credit statements, and receipts
from business transactions.
2. Post journal entries to the ledger It’s time to take those documents and start making journal
entries for your transactions. 

3. Prepare an unadjusted trial balance at the end of a reporting period, list all of your
business’s accounts and figure out their balances.

4. Prepare adjusting entries at the end of the period When you need to update entries you’ve
already made, you prepare adjusting entries.
5. Prepare an adjusted trial balance After entering in adjusting entries, you’re left with an
adjusted trial balance. This information is now ready to be turned into financial statements.

6. Prepare financial statements Finally, all the information you’ve collected is converted into
your financial statements. These reports are succinct summaries of all your business’s
financial activity.

When it comes to assessing internal financial performance, an accounting cycle is also

essential. Analyzing, journalizing and publishing transactions are continuing phases in the accounting
cycle. For example, occur at the conclusion of the cycle and offer financial statement data that a
company's management may use to make judgments regarding future expenditures and financial
plans moving ahead in the organization.