Explain The First Four Steps In Accounting Cycle

Explain the first four steps in accounting cycle

 

Answer:

The first four steps of the Accounting cycle are as follows:

1. Identifying and Analyzing business transactions - each business transaction is identified and analyzed in order to determine the different accounts involved and for the correct amounts to be recorded

2. Record the transactions in the Journals - business transactions are recorded in journal entries (at least one debit and at least one credit) using the double-entry bookkeeping method. Furthermore, the transactions are recorded in a chronological order

3. Posting to the Ledger - all the debits and credits of the journal entries are posted in the ledger by account titles (e.g Cash, Accounts receivable, Notes receivable, etc). After recording all entries, the changes in the accounts are calculated and you will get the current balance

4. Adjusting with Trial Balance - the Trial Balance is used to test if there is a balance between the Debit and the Credit. The balances of each account titles are extracted from the ledger. All debits are added and likewise the credits; all debit balances must equal all credit balances


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