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Accounting Cycle
Accounting Cycle
1) TRANSACTION OCCURS
- A transaction is a monetary activity that is recorded as an entry in accounting
records and has a monetary effect on the financial statements.
- In other meaning :
A transaction is a completed agreement between a buyer and a seller to
exchange goods, services, or financial assets in return for money. The term
is also commonly used in corporate accounting.
- Some examples of transactions: Making a payment to a business for their service or
products delivered.
2) ANALYSE TRANSACTIONS
- Meaning
Accounting transaction analysis involves documenting every transaction that
has an impact on your company's finances.
This recordkeeping step is very important in the accounting process and
helps to show how your business transactions impact your assets, liabilities,
and equity.
3) JOURNALIZE TRANSACTION
- Journalizing in accounting is the system by which all business transactions are
recorded for your financial records.
- A business transaction is first recorded in a journal, also called a Book of Original
Entry.
- In other meaning :
The process of journalizing transactions involves making journal entries for a
business' financial transactions into the journal.
The journal can be either general or special.
The general journal is the most common type of journal for small businesses
and keeps a record of every type of transaction.
4) POST JOURNAL TO LEDGER
- Meaning
Posting in accounting refers to moving a transaction entry from a journal to
a general ledger, which contains all of a company's financial accounts.
A journal's entries are chronological while a ledger compiles its transactions
by accounts, such as assets or liabilities.
- What is process of posting from a journal to the ledger?
Posting is the process of transferring the entries from the book of original
entry (journal) to the ledger.
In other words, posting means grouping of all the transactions in respect to a
particular account at one place for meaningful conclusion and to further the
accounting process.
6) ADJUST ENTRIES
- An adjusting entry is simply an adjustment to your books to better align your
financial statements with your income and expenses.
- Adjusting entries are made at the end of the accounting period. This can be at the
end of the month or the end of the year.
2) LEDGER
- Meaning of ledger :
An accounting ledger is an account or record used to store bookkeeping
entries for balance-sheet and income-statement transactions.
Accounting ledger journal entries can include accounts like cash, accounts
receivable, investments, inventory, accounts payable, accrued expenses, and
customer deposits.