What is the accounting cycle?

The accounting cycle is a number of steps that are always followed in good accounting practice. The steps cover the entire process from the first collection of transactions data to the point where the accounts are completed. The accounting cycle will thus become once in every reporting period, which is the interval in which the accounts are created. The length of the reporting period could be for the main company for up to a year for only a week for a self -employed person with several transactions. The accounting cycle is most directly related to manual accounting, known as accounting, although general principles are covered with computer accounting methods.

The number of steps in the accounting cycle depends on how it is divided. There are nine steps in this explanation. The first step is to collect data for transactions such as the Till register in the store or the payroll of employees. These are often assigned to the categories set by the company's accounting system. Categories could, for example, cover different stores or different types of products.

step two is a journalization that simply includes adding data to a running record, usually known as a general diary or book of the original record. Step Third includes complete data in the whole period of reporting in what is called the main book. The fourth step is to create what is called an untreated test balance. This is simply a control that the total credit balance, such as revenue and assets, is equal to the overall overall debit balance, such as expenses and obligations. If the sums are not the same, it is a sign that an error has been made in the process and needs identification and repair.

Step five is to note any modifications of the period that involves income or expenditure that has been earned or created but not yet noticed. Step six is ​​a modified test balance that repeats the fourth step, but includes adjustments to the period. Again, credit balances should equal debit balance.

step seven is a spillVA financial statements using numbers that were confirmed in the sixth step. Step eight is to add total profit or loss to recorded assets of the company, for example as a supplement to its cash balance. This means that the money from transactions during the reporting period is fully "charged" and does not appear in transactions in the next period. This process is known as the closure of accounts. Step nine is to check that the changes are made in the eighth balance step correct.