Accounting Cycle

Learning Objective:

1. Define and explain accounting cycle.

Accounting cycle refers to a complete sequence of accounting procedures which are required to be repeated in same order during each accounting period. Accounting cycle includes:

Recording:

First, all transactions should be recorded in the journal or books of original entry known as subsidiary books as and when they take place.

Classifying:

All entries in the journal of books of original entry should be posted to the appropriate ledger accounts to find out at a glance the total effect of all such transactions in a particular account.

Summarising:

Last stage is to prepare the trial balance and final accounts with a view to ascertaining the profit or loss made during a trading period and the financial position of the business of a particular date.

Accounting Cycle