What Are Phases Of Accounting Cycle?

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Meg Hayes Profile
Meg Hayes answered
There are four bases of any type of accounting system. These four bases are: Recording, classifying, summarizing and interpreting. It is essential that these four steps are followed, as well as good communication between the workers in order for the whole system to run as smoothly as possible.

Below are in-depth explanations of each of the four steps.

• Recording - this is the first and most basic step in accounting. It is also known as bookkeeping. During the recording phase, any financial transactions that take place must be recorded chronologically and in a systematical manner, as well as using the correct databases and books. Accounting recorders may include ledge, journals, invoices and checks, documents, assets, liabilities and the appropriate books.
• Classifying - this phase requires people to sort and group similar financial items under particular names, categories or accounts. This phase will also involve a systematically analyzing recorded data, which is where all transactions that have occurred will be grouped. In the field of accounting, the term 'ledger' is used to refer to a book which records all classifications.
• Summarizing - this phase requires that all data must be summarized after each period of accounting. The accounting period can either be each month, quarterly or at the end of every year. The summarized data must be easy to understand as it will be examined by both people who work and there and people who don't. People who work in this phase may also use graphs or charts to accompany the data.
• Interpreting - this is the final stage of the accounting processes and is very important in decision making. People who work in this stage will look at and interpret the data that has been recorded, classified and summarized in the previous stages. By doing this, these people will be able to come to informed conclusions about a business' financial condition. These people will use the data before them to establish future financial plans.
Xavier William Profile
Xavier William answered
The accounting cycle is a series of steps in recording an accounting event from the time a transaction occurs to its reflection in the financial statements also called book keeping cycle. The order of steps in the accounting cycle are:- recording in journal, posting to the ledger, preparing a trial balance and preparing financial statements. This procedure is summarized as:-
1. Journalize transactions. Enter each transaction in the general journal, creating a chronological record of each and every event considered as a transaction.
2. Post to ledger accounts Post debits and credits from the general journal to the proper ledger accounts first we have to create ledger accounts and than classify each entry with in its ledger account.
3. Prepare a Trial balance. A trial balance is the sheet which proves the equality of debits and credits in the ledger.
4. Making adjusting entries. Adjusting entries are the entries made at the end of each period these are like recording of depreciation after entering these entries in the Journal we will post them in their respective ledger accounts
5. Prepare Adjusted Trial balance. Adjusted trial balance is the prove of the accuracy of the adjusting entries.
6. Prepare financial statements. Income statement shows the shows net profit or net loss for the period. Statement of the owner's equity shows how the equity has been changed during the period. A balance sheet shows the financial position of the business at the end of the period in terms of Assets and Liabilities.
7. Journalize and posting closing entries. Clearing the accounts of revenue, expense, and drawing accounts and make them ready to record for a new period. It also transfers the net income or loss of the period to the owners capital account.
8. Prepare an after closing Trial balance. This shows that the ledgers are in balance after closing entries.
Anonymous Profile
Anonymous answered
The Accounting Cycle: The accounting cycle refers to a series of sequential steps or procedures performed to accomplish the accounting process. The steps in the cycle arc as follows:
Step 1 Transactions are recorded in the journal    
Step 2 Journal Entries are posted in the Ledger
Step 3 Preparation of a Trial Balance
Step 4 Adjusting journal entries are journalized and posted
Step5 Preparation of the worksheet     
Step 6 Preparation of the financial statements
Step 7 Closing journal entries are journalized and posted
Step 8 Preparation of the post-closing trial balance
Step 9 Reversing journal entries are journalized and posted
The Journal
The journal is a chronological record of the entity's transactions. A journal entry shows all the effects of a business transaction in terms of debits and credits. Each transaction is initially recorded in a journal rather than directly in the ledger. A journal is called the book of original entry. Of only two accounts are affected- one account is debited and the oilier account is credited- it is called a Simple Journal entry. When three or more accounts are required in a journal entry, the entry is referred to as a Compound entry.
The Ledger
A grouping of the entity's accounts is referred to as the ledger. Although some firms may use various ledgers to accumulate certain detailed information, all firms have a general ledger. A general ledger is the reference book of the accounting system and is used to classify and summarize transactions, and to prepare data for the basic financial statements.
The Trial Balance
The Trial Balance is a list of all accounts with their respective debit or credit balances. It is prepared to verily the equality of debits and credits in the ledger at the end of each accounting period or at any time the postings are updated.

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