Accounting Cycle: 10 Steps of the Accounting Process

Modifications for accrual accounting versus cash accounting are usually one major concern. For example, public entities are required to submit financial statements by certain dates. All public companies that do business in the U.S. are required to file registration statements, periodic reports, and other forms to the U.S. Therefore, their accounting cycles are tied to reporting requirement dates. The accounting cycle is a methodical set of rules that can help ensure the accuracy and conformity of financial statements. Computerized accounting systems and the uniform process of the accounting cycle have helped to reduce mathematical errors.

A business can conduct the accounting cycle monthly, quarterly or annually, based on how often the company needs financial reports. Such users of principal accounting statements take financial decisions based on the entity’s 1) financial position, 2) operating performance and 3) financial health. After all the balances are brought down in Trial Balance, each side of the trial balance is added.

Step 3. Post transactions to the general ledger

Ledger posting simply refers to posting the financial transactions recorded in journal books to individual ledger statements. Cash flow statement, income statement, balance sheet and statement of retained earnings; are the financial statements that are prepared at the end of the accounting period. Financial statements are prepared from the balances from the adjusted trial balance. The financial statements are made at the very last of the accounting period. Creating an unadjusted trial balance is crucial for a business, as it helps ensure that total debits equal total credits in your financial records.

The accounting cycle is based on policies and procedures that are designed to minimize errors, and to ensure that financial statements can be produced in a consistent manner, every time. To make the cycle more robust, organizations incorporate a complete suite of control activities into the procedures. In addition, most businesses use accounting software to accumulate transactional data and convert them into financial statements.

What is Accounting Cycle or Accounting Process?

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If you need a bookkeeper to take care of all of this for you, check out Bench. We’ll do your bookkeeping each month, producing simple financial statements that accounting cycle show you the health of your business. The trial balance provides the company with insight into the balances in the account and discovers any discrepancies.