4-19RQ - Horngren'S Financial And Managerial Accounting

Question

List the steps of the accounting cycle.

Step-by-Step Solution

Answer

The steps in the accounting cycle are as follows: 

• Start with the beginning account balances.
• Analyze and journalize transactions as they occur.
• Post journal entries to the accounts.
• Compute the unadjusted balance in each account, and prepare the unadjusted trial balance.
• Enter the unadjusted trial balance on the worksheet, and complete the worksheet (optional).
• Journalize and post adjusting entries.
• Prepare the adjusted trial balance.
• Prepare the financial statements.
• Journalize and post the closing entries.
• Prepare the post-closing trial balance.

Explanation on Accounting Cycle

Accounting cycle is the process which is used by the companies to prepare the financial statements.

Process in Accounting Cycle

Accounting cycle starts with beginning balances of the accounts, then transactions are analyzed and journalized, after this transactions are posted to respective accounts, then unadjusted balance of each account is computed, then unadjusted balances are entered in the worksheet and completed, after this adjusting entries are recorded and posted, then adjusted trial balance is prepared, after this financial statements are prepared, now closing entries are journalized and posted, and finally closing trial balance is prepared.