Accounting Cycle

Accounting cycle or accounting process includes the following:

1. Identifying the transactions from source documents like purchase orders, loan agreements, invoices, etc.

2. Recording the transactions in the journal or subsidiary books as and when they take place.

3. Classifying all entries posted in the journal or subsidiary books and posting them to the appropriate ledger accounts.

4. Summarising all the ledger balances and preparing the trial balance and final accounts with a view to ascertain the profit or loss made during a particular period and ascertaining the financial position of the business on that particular date.