For an accounting period, a series of accounting procedures need to be repeated. This is known as Accounting Cycle.
Series of the Accounting Cycle:
There is a particular series that has to be followed in this regard.
- Recording the details:
All the business transactions during a specific time period is to be recorded.
- Classifying the details:
A classification is to be made while these are posted to ledger accounts and finally net effect is to be read from that.
- Summarising details:
This is a final compilation of annual transactions with ledger balances for company. It is based on this that Trial Balance and Final Accounts Balance is made from which profit and loss of a company can be depicted, and further business decisions can be taken.
It is important for a student to follow up this cycle for better understanding of accounting compilations.