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ACCOUNTING CYCLE

Accounting cycle refers to an order of accounting procedures which are needed to be repeated in the same order during each accounting period.

Recording

Classifying

Summarising

 

(i)                 RecordingFirst and foremost activity of accounting is recording of business transactions in the journal.

(ii)               Classifying. Classifying the transactions in the journal by posting them to the appropriate ledger accounts to find out at a glance the total effect of such transactions in a particular account.

(iii)              SummarisingSummarising simply refers to consolidation of one year transactions with the help of ledger Balances. Based upon these Balances, Trial Balance, and final accounts are to be prepared with a view to ascertaining profit or loss made during the particular financial year or trading period.