We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is the Accounting Cycle?

John Lister
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The accounting cycle is a series of steps which are always followed in good accounting practice. The steps cover the entire process from first gathering data about transactions to the point when the accounts are completed. The accounting cycle thus happens once in each reporting period, that being the interval at which accounts are produced. The length of the reporting period could be as little as a week for a major firm to a year for a self-employed person with few transactions. The accounting cycle applies most directly to manual accounting, known as bookkeeping, though the general principles are covered by computerized accounting methods.

The number of steps in the accounting cycle depends on how it is broken down. In this explanation there are nine steps. Step one is to collect the data for transactions, such as the till register in a store or the employee payroll. These are often assigned into categories determined by the company's accounting system. The categories could cover different stores or different product types, for example.

Step two is journalization, which simply involves adding the data to a running record, usually known as the general journal or book of original entry. Step three involves totaling up the figures across the entire reporting period in what is known as the general ledger. Step four is to produce what is known as an unadjusted trial balance. This is simply a check that the total of all credit balances such as revenues and assets equals the total of all debit balances such as expenses and liabilities. If the totals are not equal, it is a sign that a mistake has been made in the process and needs identifying and correcting.

Step five is to make a note of any period-end adjustments, which include revenue or expenses that have been earned or incurred, but not yet recorded. Step six is the adjusted trial balance, which repeats the process from step four but includes the period-end adjustments. Again, credit balances should equal debit balances.

Step seven is to prepare financial statements using the figures which have been confirmed by step six. Step eight is to add the overall profit or loss figure to the company's recorded assets, for example as an addition to its cash balance. This means the money from transactions during the reporting period is fully "accounted for" and does not appear in the figures for transactions in the next period. This process is known as closing the accounts. Step nine is to check that the changes made in the step eight balance are correct.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
John Lister
By John Lister
John Lister, an experienced freelance writer, excels in crafting compelling copy, web content, articles, and more. With a relevant degree, John brings a keen eye for detail, a strong understanding of content strategy, and an ability to adapt to different writing styles and formats to ensure that his work meets the highest standards.
Discussion Comments
John Lister
John Lister
John Lister, an experienced freelance writer, excels in crafting compelling copy, web content, articles, and more. With...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.