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  Accounting Cycle

Introduction to Accounting Cycle

It is necessary to explain the accounting cycle in concise. The cycle starts with the happening of a transaction and ends along with the preparation of final accounts that is Profit and Loss Account and Balance Sheet. The following chart will depict the accounting cycle.

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As explained above, the accounting cycle begins with a transaction. When a transaction occurs, it is kept in the books of Prime Entry that is either Journal or subsidiary books. After recording similar in these text books, the transaction is posted in the ledger that is termed as book of secondary entry. Each ledger accounts are closed and a list of similar is prepared that is termed as 'Trial Balance'. By the Profit and Loss Account, the trial balance, final accounts, and Balance Sheet are ready.

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