Hello there ladies and gentlemen! I hope you're enjoying this wonderful day. Today I'm here to share an article I found in the QuickBooks Blog. It offers a really helpful guide with an
8-step accounting cycle. Let's take a closer look...
You know I like to start off with a definition, so here's one for you. "The accounting cycle is a series of 8 steps that an organization uses to identify, analyze, and record transactions and the accounting procedures of the company. Through this 8-step process, accountants will use the accounting cycle as a checklist to run through a set of well-planned procedures to determine which step to perform next to complete the cycle. When completed correctly, the accounting cycle ultimately delivers an accurate set of financial statements."
There are many benefits to using this accounting process but the most notable ones would be increased organization, asset protection, and easier reporting.
That all sounds pretty good! Now you're ready to learn the process so you can reap the benefits.
- Identify your transactions: This includes all identifying features such as dats, prices, and total amounts paid.
- Record the transactions: Keep each transaction in chronological order, note credit or debit, add any important notes if necessary.
- Post transactions to the general ledger.
- Create the trial balance: "The trial balance provides the company with insight into the balances in the account and discovers any discrepancies."
- Analyze the worksheet: This is the part where you have to decide what adjustments to make to balance the books after discovering discrepancies.
- Adjust journal entries: Once you've noted what adjustments actually need to be made, you can make them with journal entries. Journal entries are used to debit one account while crediting another and vice versa.
- Create financial statements: You're almost finished! Next, you're ready to create financial statements (aka, reports). These include the balance sheet, income statement, and cash flow statement.
- Close the books: That's a wrap! You can close the books for the current accounting period when you're all done and then you're ready to move on and start the process over again.
This 8-step accounting cycle is an easy way to breakdown the process to keep your financials in order. The good news is, QuickBooks actually does a lot of this work for you! I hope these steps come to mind the next time you're working on your books. And if you ever need a hand, the Community is here to help!
