Running head: ACC 201 MODULE TWO SHORT PAPER 1
ACC 201 Module Two Short Paper 5
201 Module Two Short Paper: The Accounting Cycle
Janae’ C. Malry
Southern New Hampshire University
This paper will discuss the importance of the accounting cycle and the products that it supplies along with the ten steps that makes up the cycle. If this cycle is not followed correctly, it can cause many errors when information is input into a journal. Following this cycle, it keeps financial statements correct and up to date. In order to use the accounting cycle, we first must know what it is. The accounting cycle is the process where information is looked at and entered into a journal with transactions that end up ending with a post-closing trail balance.
The accounting cycle has ten steps all in total, that makes up the cycle. The first step is to analyze and record transactions in the journal using the double-entry accounting system. During this step, you must carefully read the description of the transaction to determine whether an asset, liability, common stock, retained earnings, dividends, revenue, or expense account is affected. Also in this step, each transaction must be determined whether the account increases or decreases and must be marked as a debit or credit. Step two is when the transaction is recorded in the journal. The date is to be entered in the date column, the amount is to be entered into the debit or credit column, journal page number is entered in the posting reference column, and the account number is entered in the posting reference column. In step three, an unadjusted trail balance is prepared to determine whether any errors have been made in posting the debits and credits to the ledger. The unadjusted trail balance does not provide clear accurate information in the ledger and only shows that the debit and credit are equal. If the totals are not equal, then an error has been made and must be found. Step four, is assembling and analyzing adjustment data. Before the financial statements can be prepared, the accounts must be updated. Step five is an optional end-of-period spreadsheet is prepared. Well this step is not required, it is useful in showing the flow of accounting information from the unadjusted trail balance to the adjusted trail balance. Step six, journalizing and posting adjusting entries. In step seven, an adjusted trail balance is prepared to verify the equality of the total of the debit and credit balance. This is the last step...