Joe's Financial Statements: Accounting cycle
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Task Name: Phase 4 Discussion Board
In the P4-IP2 assignment, you completed the accounting cycle for Joe's business. What is the accounting cycle? List the steps and explain why each is necessary. In reviewing Joe's first accounting cycle, comment on the financial performance of the business so far. Do you think Joe will be pleased with the results? Why/why not?
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Solution Summary
The solution examines the accounting cycle for Joe's Financial Statements.
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Accounting cycle is a process that begins with the occurrence of a transaction and ends with the closing of books of accounts. The various steps involved are:
Identification of transaction
The first step in the accounting cycle is the identification of any transaction. This is done through some source document which may be a receipt, invoice or bank transaction. The accounting cycle process comes into existence upon the occurrence of a transaction and it is important to identify the same.
Analyzing the transaction
The next step is to analyze the transaction and determining the accounts that are affected. Also quantifying the amount involved. This is important to determine if the transaction has an impact on the accounts and the amounts involved.
Journalizing the transaction
Once the transaction is analyzed, it must be recorded in the form of a journal with debits and credits accounted. This may be in the form of a purchase journal, sales journal, cash journal, general journal.
The process of actual recording of the transaction in the books of accounts begins ...
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