Accounting is essential to any business, specifically full cycle accounting. The definition of accounting cycle is a process of recording significant events in a business. Recording such events helps ensure that every transaction is reported correctly and accounted for, and no money is lost or unnecessarily added in between.

• Identifying the Transactions

The first step is identifying the transaction and all other information you have on them. It’s essential to take into account the accounting method that the business uses and its operating cycle accounting. If your business uses accrual accounting, then the transactions should be recorded the moment they start. 

• Recording of Transactions 

Traditionally, people used to record transactions as debit or credit in journals, also known as double-entry accounting. However, thanks to modern technology, such recording is now automatic. That is if you classify the transactions accordingly in your software. 

• Post to the General Ledger

After the transactions are identified and recorded accordingly, an entry will be posted in the general ledger. It will then break down the accounting activities on an account-by-account basis. This step helps bookkeepers create a bigger and better picture of how the business is going and how much cash the business has on hand. 

• Calculate the Unadjusted Balance

After the breakdown, the trial balance is calculated. This is to present the unadjusted balances that each account might have and serves as a basis for the next step. 

• Worksheet and Adjusting Entries

The next step is to adjust the entries. This step uses a worksheet to adjust the entries so that the total debit balance equals the total credit balance. If there are any irregularities, the worksheet can efficiently show where they occur. 

• Adjusting the Journal Entries

If there are still irregularities, then the bookkeeper will make the necessary adjustment as journal entries. Entries that are not created by external events are entered at this time and they should be based on accounting cycle order.

• Create the Business’ Financial Statements

The next step is generating the balance sheet, income statement, and cash flow statement. Such financial statements help see the overall performance and financial outlook, and health of the business. 

• Finalize the Accounts and Books

The final step is to close the temporary accounts such as expenses and revenue and turning them into permanent accounts.