Accounting Cycle

Definition-business is the step by step  road map of recording of accounting information in the balance sheet, then post the information to the ledger accounts, followed by extraction of trial balance. The last step is to prepare a trading, profit and loss account to extract gross or net profit or (loss) respectively. Then a new balance sheet is prepared.

A basic Accounting cycle is needed in the beginning of a financial period for it will act as a road map towards preparation of financial statements

A basic Accounting cycle is inter-connected as follows; balance sheet-ledger account-trial balance-trading and profit and loss account-back to balance sheet.

accounting-cycle-example

See  basic accounting cycle and advanced accounting cycle for a more advanced outlook

About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.