Understand the Definition of the Accounting Cycle and Its Stages

The accounting cycle is very important in a company. This cycle becomes a series of activities or activities which are used in identification, analysis and also to record events during your company operation. In general, this process is carried out within one year. At the end of the year the accounting results will be reported to the company. The accounting process that occurs repeatedly is what makes the cycle known as the accounting cycle.

Definition
In general, this accounting cycle is an iterative accounting process. This cycle is used in the analysis identification process and then records every accounting activity carried out in a company. Usually this cycle occurs within one year. Within one year, all the principles, rules, methods up to accounting techniques are widely used to record all accounting in the company.

The cycle starts at the beginning of the year then at the end of the year it closes with a closing journal. The process of accounting is mutually continuous and will continue to be repeated as long as your company is still active. With this cycle, you, as the owner of the company, will be able to carry out analysis related to the company's financial condition. The financial condition of this company must be well known because it can be used to formulate future corporate strategies.

Stages
As a cycle, this accounting has various kinds of stages, the process of which must be carried out sequentially. The purpose of this cycle is to provide accurate and real time accounting information. Having the right accounting information can help your company make decisions. The following are some of the stages in the accounting cycle that are important for you to know:

Transaction identification
The identification of each of these transactions becomes a stage in this cycle. The identification activities will be carried out appropriately by the accountants. Accounting will carry out every transaction that occurs. This accounting transaction that is always recorded will have an impact on the company's financial condition and will also make the assessment more objective.

Transaction analysis
The next stage is transaction analysis. The accountant will analyze each of these transactions and their effects on the company's financial condition. Every transaction that occurs can affect finances, both debit and credit must be in the same amount.

Transaction records are journals
The next stage is to record all transactions in a journal. In accounting, this journal can be interpreted as a chronological record of the transaction period that occurred. This process will enter the information into the journal.

For this journal, transactions are divided into two parts, where the first is credit and debit. In addition, recording is also carried out in general journals. The recording must be thorough and sequential so that no transactions are missed.

Ledger
After the accounting journal is then transferred to the general ledger. General ledger is a collection of bookkeeping accounts which contains information on certain assets recorded in one period only. Each account in the general ledger will be assigned a specific code.

Trial balance and adjusting entries

This trial balance contains a list of the balances of each account and if there are transactions that have not been recorded, it is mandatory to make an adjusting journal.

Adjusted trial balances, financial statements and closing journals
The stages of the cycle in accounting are long and require precision. The last step you take is to make adjusting balances, financial statements and also closing journals.

Accounting has become a complex and time consuming process. Slightly incorrect notes will make the results imprecise and real time. Make the accounting process in your company run automatically and optimally by using accounting software from SOLTIUS.

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