
Intermediate Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (2nd Edition)
2nd Edition
ISBN: 9780134833101
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 4, Problem 4.1Q
To determine
To describe: The accounting cycle.
Expert Solution & Answer

Explanation of Solution
Accounting cycle:
The accounting cycle refers to the process of recording and summarizing the financial events of a business. It operates in the form of a cycle, with the steps of accounting activities followed in a cyclical order. The cyclical order starts at the beginning of a transaction, until the time when financial results are derived subsequent to the preparation of the
There are nine steps involved in the accounting cycle. They are discussed as follows.
- Step 1: It involves indentifying whether an economic activity has occurred or not. Once an economic activity has been identified, it is required to be recorded in the books of accounts.
- Step 2: It involves passing the
journal entries for transaction identified as economic events in the first stage. - Step 3: It involves
posting the journal entries by transferring the journal entries to the general ledger. - Step 4: It involves preparing the unadjusted
trial balance after all balances have been closed. - Step 5: It involves preparing the
adjusting entries so as to determine the effect of the cutoff date for the purpose of closing a financial period. It helps ensure that all economic activities have been recorded. - Step 6: It involves preparing the adjusted trial balance after considering the effect of adjusting entries.
- Step 7: It involves preparing the income statement,
balance sheet , and the statement ofcash flows. - Step 8: It involves closing the temporary accounts, such as revenue, expenses, and dividend account.
- Step 9: It involves post-closing the trial balance. A trial balance is prepared after the closing of entries.
Conclusion
Hence, the accounting cycle is discussed as above.
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Chapter 4 Solutions
Intermediate Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (2nd Edition)
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