What Is the Accounting Cycle? The accounting process comes after very specific recommendations and includes an accounting cycle flowchart. The accounting routine contains ten steps from determining what is a transaction to documenting the transaction properly to reconciling your trial balance. The purpose of the accounting cycle, if followed properly, is to attain accurate financial statements that show the true state of your business, it’s profits or deficits. Any business that fails to follow the accounting cycle could find these are lost in an influx of numbers that make no sense along with inaccurate data. A lot of things can go wrong if the accounting routine is not implemented.
If you’ve ever applied for any sort of business loan or credit, you were probably asked to produce a reconciled balance income and sheet and expenditure declaration. In case your accounting cycle isn’t followed correctly, both these documents shall be wrong. The worst part might be when the banker or a financial company realize your details are incorrect, which is not only embarrassing, but it may become a bigger headache to improve.
General Ledger – The overall ledge is a location where most journal entries are created. Specific Journals – Journals may also be specific such as a sales cost and journal of sales journal. Controlled-Schedules – Schedules that is controlled is usually those that need to keep an eye on something such as inventory, payables, and receivables.
Trial Balance – The trial balance is a compilation of all the data …