HomeUncategorizedThe 11 Important Steps in the Accounting Cycle

The 11 Important Steps in the Accounting Cycle

Understanding the Accounting Cycle


Accounting is a process of recording business transactions and financial reporting. The process reflects a continuous and uninterrupted cycle. Accounting has a cycle related to the activities of recording business transactions and financial reporting.

Why is the Accounting Cycle Important for a Trading Company?
Financial statements are a form of corporate financial responsibility by each part that uses the company’s cash.

On this occasion we will discuss the importance of the accounting cycle for trading companies.

Example of a Complete Trading Company Accounting Cycle

The trading company accounting cycle is the process of making a trading company financial report for a certain period in the following order:

Identification Transactions in the General Journal

The general journal is the first activity in it that records transactions from the company’s revenue and expense cycles for a certain period.

Creating a Subsidiary Ledger

The purpose of the subsidiary ledger is to detail all account balances and transactions that affect accounting changes in the financial statements.

Post to Ledger

The aim is to facilitate the identification process in the journal.

Cost of Goods Sold Report

Financial and tax accounting used to describe the total expenses incurred by companies arising from goods and/or services produced and then sold in business activities in one period is called the Cost of Goods Sold Report.

Creating a Trial Balance

Trial balance is a term of trial balance that has all the data from the company’s general ledger. Trial balance account number, account name, debit, and credit for a certain period are examples of it.

Adjusting journal entry

Adjusting journals record changes in balances in a particular account that can ultimately show the actual balance.

Trial After Adjustment

The information on the numbers in this column is the result of adding or subtracting the numbers in the adjusting journal column.

Preparing Financial Statements

The purpose of financial reporting is to provide information relating to the financial position, performance, and changes in the financial position

Making Closing Journals in the Trading Company’s Accounting Cycle

The closing journal is an activity to journalize and close its process after that for the next period you can prepare the accounts that will be used as financial statement journals.

Trial After Closing

A post-closing trial balance is a list containing all real account balances. In this step, the accountant prepares a post-closing trial balance.

Turning Journal

A reversing journal is a journal that serves to reverse adjusting entries to form a balance sheet account.

Conclusion

The accounting cycle is a series of steps that occur over a predetermined period of time, resulting in financial statements that are useful for users of financial statements. It can be internal and external parties. Starting with the occurrence of transactions that are recorded and collected systematically.

Meanwhile, accounting was still conventional where all input of financial statement journals were still processed manually, then with the presence of Accounting Software such as an accounting program from Hashmicro which contains all of these processes it becomes easier, more efficient, and has the main features complete so that it can save time.

accounting system

Interest in getting savvy tips for improving your business efficiency?

Vanecia
Full-time Internship Content Writer at HashMicro | Content is the reason search began in the first place.

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