What is Accounting cycle?
Accounting cycle (Definition)
The accounting cycle is a series of steps that are used to document and track the financial transactions of a business for a particular period of time. It follows each transaction from the moment it occurs until it impacts the business's finances. There are essentially eight steps to the accounting cycle: analyze the transaction to determine whether it is a purchase, debt, or sale; record the details as journal entries (accounts receivable, accounts payable); post in financial ledgers; prepare the unadjusted trial balance; ensure there are no errors; record any adjusted errors and make sure debits and credits still balance; prepare financial statements; close temporary accounts. A "soft close" can take place at any time during the fiscal year, while a "hard close" takes place only at the end of the fiscal year.