Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition1

Chapter 1The Accounting Cycle

Ch1

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition2

The Accounting Cycle

This tutorial guides you through the eight steps of the accounting cycle. The accounting cycle includes ongoing and yearly activities.

For more detailed instructions, refer to Section 1.4 of the Accounting 1 textbook.

You may wish to review the accounting cycle as you progress through the course and encounter the steps in the cycle.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition3

The Accounting Cycle

Four of the steps occur in the outer ring.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition4

The Accounting Cycle

1. Transaction occur.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition5

The Accounting Cycle

2. Transactions are recorded in the journal.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition6

The Accounting Cycle

3. Journal entries are posted to ledger accounts.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition7

The Accounting Cycle

4. Trial balance and interim financial statements prepared.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition8

The Accounting Cycle

These outer ring activities are ongoing and cyclical.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition9

The Accounting Cycle

Four of the steps occur in the inner ring.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition10

The Accounting Cycle

5. The worksheet is prepared.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition11

The Accounting Cycle

6. Formal financial statements are prepared.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition12

The Accounting Cycle

7. Ledger accounts are adjusted and closed.

Chapter 1 – The Accounting Cycle l DRAFT | Accounting 1, 7th Edition13

The Accounting Cycle

8. The post-closing trial balance is prepared.

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The Accounting Cycle

The cycle is complete and it begins to repeat itself.