8 Steps or phases of accounting cycle

When complete sequence of accounting procedure is done which happens frequently and repeated in same directions during an accounting period, the same is called an accounting cycle.
Steps/Phases of Accounting Cycle

The steps or phases of accounting cycle can be developed as under:

(a) Recording of Transaction: As soon as a transaction happens it is at first recorded in subsidiary book.

(b) Journal: The transactions are recorded in Journal chronologically.

(c) Ledger: All journals are posted into ledger chronologically and in a classified manner.

(d) Trial Balance: After taking all the ledger account closing balances, a Trial Balance is prepared at
the end of the period for the preparations of financial statements.

(e) Adjustment Entries : All the adjustments entries are to be recorded properly and adjusted
accordingly before preparing financial statements.

(f) Adjusted Trial Balance: An adjusted Trail Balance may also be prepared.

(g) Closing Entries : All the nominal accounts are to be closed by the transferring to Trading Account
and Profit and Loss Account.

(h) Financial Statements : Financial statement can now be easily prepared which will exhibit the true financial position and operating results.

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