Understanding the Accounting Cycle Financial Acct. Describe the accounting cycle
ID: 2500773 • Letter: U
Question
Understanding the Accounting Cycle
Financial Acct.
Describe the accounting cycle in clear, concise terms, understandable by non-accountants. Define terms, and include the "what" and "why" of the accounting cycle in your description. If you need an example transaction to help in your description, use "cash paid for advertising" expense.
Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical manner as appropriate for the genre of writing. Use well-structured sentences, audience-appropriate language, and correct conventions of standard American English.
Explanation / Answer
The accounting cycle is often described as a process that includes the following steps: identifying, collecting and analyzing documents and transactions, recording the transactions in journals, posting the journalized amounts to accounts in the general and subsidiary ledgers, preparing an unadjusted trial balance, perhaps preparing a worksheet, determining and recording adjusting entries, preparing an adjusted trial balance, preparing the financial statements, recording and posting closing entries, preparing a post-closing trial balance, and perhaps recording reversing entries.
Cycle and steps seem to be a carryover from the days of manual bookkeeping and accounting when transactions were first written into journals. In a separate step the amounts in the journal were posted to accounts. At the end of each month, the remaining steps had to take place in order to get the monthly, manually-prepared financial statements.
Accounting cycle is depicted in the below flow chart:
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