How Do You Identify The Steps In The Accounting Cycle?
The accounting cycle, also known as the “bookkeeping cycle,” accounts for the expenses and profits of a business. It starts with a transaction and ends when the financial books are closed at the end of the month and at the end of the fiscal year. Any activity involved with reporting financial transactions can be identified as steps in the accounting cycle. Most companies use software to manage the accounting cycle; however, it’s helpful to understand the steps when reconciling account discrepancies or investigating fraud. Identify the transaction and assign it to an accounting category. This may involve reviewing paperwork, such as receipts, invoices and purchase orders. The four major categories of accounting transactions are revenue, expenses, assets and liabilities. Determine if the transaction will impact the ledger as a cost or a profit. Record the transaction by making chronological journal entries. There are usually separate journals for revenue, expenses, assets and liabilities
