The process of going from sales to end-of-month statements has several steps, all of which must be executed correctly for the entire accounting cycle to function properly. Part of this process includes the three stages of accounting: collection, processing and reporting.

The proper order of the following steps in the accounting cycle is: journalize transactions, post to ledger accounts, prepare unadjusted trial balance, journalize and post adjusting entries.

Accounting Cycle – 10 Steps of Accounting Process Explained

1. Analyzing and Classify Data about an Economic Event.
2. Journalizing the transaction.
3. Posting from the Journals to General Ledger.
4. Preparing the Unadjusted Trial Balance.
5. Recording Adjusting Entries.
6. Preparing the Adjusted Trial Balance.
7. Preparing Financial Statements.
8. Recording Closing Entries.

Click on any of these steps to skip to that part of the process, or read them all in order:

• Analyze and measure financial transactions.
• Record transactions in Journal.
• Post information from Journal to General Ledger.
• Prepare unadjusted Trial Balance.
• Prepare adjusting entries.
• Prepare adjusted Trial Balance.

First Four Steps in the Accounting Cycle. The first four steps in the accounting cycle are (1) identify and analyze transactions, (2) record transactions to a journal, (3) post journal information to a ledger, and (4) prepare an unadjusted trial balance.

The Nine Steps in the Accounting Cycle

• Step 1: Analyze Business Transaction.
• Step 2: Journalize Transaction.
• Step 3: Posting To Ledger Account.
• Step 4: Preparing Trial Balance.
• Step 5: Journalize & Post Adjustments.
• Step 6: Prepare Adjusted Trial Balance.
• Step 7: Prepare Financial Statements.

Explaining Accounting Cycle in Context Defining the accounting cycle with steps: (1) Financial transactions, (2)Journal entries, (3) Posting to the Ledger, (4) Trial Balance Period, and (5) Reporting Period with Financial Reporting and Auditing.

We will examine the steps involved in the accounting cycle, which are: (1) identifying transactions, (2) recording transactions, (3) posting journal entries to the general ledger, (4) creating an unadjusted trial balance, (5) preparing adjusting entries, (6) creating an adjusted trial balance, (7) preparing financial …

When creating your income statement, list revenues first. Then, list out any expenses your company had during the period and subtract the expenses from your revenue. The bottom of your income statement will tell you whether you have a net income or loss for the period.

The basic exchanges can be grouped into five major transaction cycles.

• Revenue cycle—Interactions with customers.
• Expenditure cycle—Interactions with suppliers.
• Production cycle—Give labor and raw materials; get finished product.
• Human resources/payroll cycle—Give cash; get labor.
• Financing cycle—Give cash; get cash.

There are commonly three types of Transaction cycles affecting most of the firm’s economy. These cycles exist in all types of business such as Profit seeking and non-Profit seeking organizations and these cycles are: Expenditure Cycle, Conversion Cycle and Revenue Cycle.

Three transaction cycles process most of the firm’s economic activity: the expenditure cycle, the conversion cycle, and the revenue cycle. These cycles exist in all types of businesses— both profit-seeking and not-for-profit.

These four types of financial transactions are sales, purchases, receipts, and payments.

An accounting transaction is a business event having a monetary impact on the financial statements of a business. It is recorded in the accounting records of the business. An employee is dismissed from the job does not have any monetary impact so it is not a transaction.

Check every bill or payment received for accuracy before recording it in an accounting journal. Ensure all have been approved by a supervisor or business owner before you enter any transactions. Set up different accounts or categories for each type of transaction. Accounts can consist of cash, inventory, expenses, etc.

Noncash expenses are those expenses that are recorded in the income statement but do not involve an actual cash transaction. A common example of noncash expense is depreciation. When the amount of depreciation is debited in the income statement, the amount of net profit is lowered yet there is no cash flow.

The Ten Most Common Basic Accounting Transactions

1. The Owner Investing Capital.
2. Creating a Liability (Debt)
3. Purchasing an Asset.
4. The Owner Withdrawing Business Funds.
5. Income Received Immediately.
6. Income on Credit.
7. Getting Paid by a Debtor.
8. Expenses Paid Immediately.

Take a look at the three main rules of accounting: Debit the receiver and credit the giver. Debit what comes in and credit what goes out. Debit expenses and losses, credit income and gains.

Classify balance sheet accounts as assets, liabilities or equity. Classify income statement accounts as revenue, expenses or draws. You can debit or credit an account. Debits are always on the left column and credits are always on the right column.

Examples of business transactions are: Buying insurance from an insurer. Buying inventory from a supplier. Selling goods to a customer for cash.

Answer: There are two types of transactions in accounting i.e. revenue and capital.

Examples of Transactions

• Sales of Goods and Services for Cash or Credit.
• Subscribing to a Netflix Premium plan (there is an interaction between you (the buyer) and Netflix (the Seller)
• Purchase of inventory on cash or credit.
• Purchase of an asset.
• Disposal of an asset.
• Payment of salaries to employees.

A business transaction must have the following characteristics:

1. It must be for a sum certain in money (i.e., of a financial value)
2. It must be supported by a source document (e.g. sales invoice, official receipt, disbursement voucher, remittance advice, etc.)
3. It must have a two-fold effect in the elements of accounting.