Accounting Cycle Essay

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Accounting Cycle
Kayla Trout

Accounting Cycle

The accounting cycle is an organized procedure utilized to assist perform the basic function of accounting that is to identify, document, and convey information. A company or firm might have its own unique method of carrying out its accounting cycle; however each should perform the job in one way or another. Alvarez Bookkeeping Services, a small family managed company, has got an extremely simple model of the accounting cycle. The organization started and operated for most of its twenty five years having one person and lately grown to a three-person firm, one proprietor and 2 workers constitute this small company. One individual does the whole accounting cycle for the Alvarez Bookkeeping Services, the proprietor. Slowly as time passes the accounting cycle has developed just like business has developed; the several steps have been reduced as technology has simplified the process, “these days, most companies make use of accounting software which processes several of these steps at the same time” (“What is the accounting cycle?“, 2007, para. 3).

The accounting cycle is made up of: determining, journalizing, posting, trail balance, modified entries, modified trial balance, preparing fiscal reports, ending, post-closing trial balance, reversing entries, and fiscal reports (Kieso, Weygandt, & Warfield, 2007, Chapter 3). Determining a deal or event is the 1st step in the cycle; companies take part in different activities on a regular basis, as a consequence, identifying when to document and activity is important. As soon as the activity has been identified as a deal which should be documented, then the following step is to journalize the deal. The journalizing process can be carried out in a number of methods; the most popular way is the general journal, though some organizations maintain other special journals. The next phase in the accounting cycle is posting, that is “the process of shifting journal entries to the ledger accounts” (Kieso et al., 2007, Chapter 3), in order that the deals reflect in the appropriate ledger accounts balances. Following the deals from the general journal have moved to the general ledger a trail balance can be carried out. The trial balance “details accounts as well as their balances at a specific time” (Kieso et al., 2007, Chapter 3), that is very useful in detecting mistakes which might have taken place during recording or posting. In case a mistake is found or a deal is absent a modifying entry is created. Modifying entries might also be created to update an account, for example prepaid accounts. For example, an organization might have pre-paid insurance which is on its books as assets, after that at the conclusion of the period a modifying entry was designed to reflect what is prepaid as well as what is an expenditure. In many cases a trial balance is completed after the modifying entries are created simply to make sure everything is still in balance. At this stage in the accounting cycle the fiscal reports are typically created, the most popular are the: balance sheet, income report, and saved earnings. The accounting cycle ends with the final entries and ending trial balances. The expense as well as revenue accounts are closed against income summary, that is then closed against saved earnings. Therefore, preparing the cycle to start once again in the coming period.