Accounting Cycle Flashcards
What is the accounting cycle?
The accounting cycle is the process of recording, classifying, and summarizing financial transactions to prepare financial statements.
What is the first step in the accounting cycle?
Identify Transactions
Identify and gather all financial transactions that affect the business during the accounting period.
What is the second step in the accounting cycle?
Record Transactions in the Journal
Record each transaction as a journal entry in the general journal, including a debit and a credit.
What is the third step in the accounting cycle?
Post to the Ledger
Transfer (post) transactions to the appropriate accounts in the general ledger.
What is the fourth step in the accounting cycle?
Prepare an Unadjusted Trial Balance
Check if total debits equal total credits to ensure the accounting equation is balanced.
What is the fifth step in the accounting cycle?
Adjusting Entries
Make necessary adjustments for accrued or deferred revenue, expenses, and depreciation.
What is the sixth step in the accounting cycle?
Post Adjusting Entries
Post the adjusting entries to the appropriate accounts in the general ledger.
What is the seventh step in the accounting cycle?
Prepare an Adjusted Trial Balance
Ensure total debits still equal total credits after adjusting entries are posted.
What is the eighth step in the accounting cycle?
Prepare Financial Statements
Prepare the income statement, statement of retained earnings, balance sheet, and statement of cash flows.
What is the ninth step in the accounting cycle?
Close Temporary Accounts
Close out temporary accounts to retained earnings to prepare for the next accounting period.
What is the tenth step in the accounting cycle?
Prepare Post-Closing Trial Balance
Ensure the accounting books are still in balance, including only permanent accounts.
What is the final step in the accounting cycle?
Prepare for the Next Accounting Period
Update accounting records and get ready for new transactions.
