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Completion of Accounting Cycle

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What are the steps in completing the accounting cycle?

How do the different steps affect the financial statements?

What is the effect on the financial statements of missing a step when completing the accounting cycle?

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Solution Summary

What are the steps in completing the accounting cycle?

How do the different steps affect the financial statements?

What is the effect on the financial statements of missing a step when completing the accounting cycle?

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Dear Student,

I have guided you with the first two questions and allowed you to use this information to answer the third question on your own. OTAs are not supposed to give you hand-in ready solutions, you must do part of the work on your own.

Steps in Completing the Accounting Cycle

The term, accounting cycle, refers to the steps involved in accounting for all of the business activities during an accounting period. These steps are repeated each reporting period. There are ten steps to the accounting cycle. We will go through each one in detail.
Step one is the analysis of the transactions.
Step two - journalize transactions.
Step three - Post transactions to the ledger accounts.
Step four - Prepare the unadjusted trial balance.
Step five - Post adjusting entries.
Step six - Prepare the adjusted trial balance.
Step seven - Prepare financial statements.
Step eight - Close the temporary accounts.
Step nine - Prepare a post-closing trial balance, and
Step Ten - Reversing entries (optional)

How do the Different Steps Affect the Financial Statements?
It's important that you realize when the steps occur. Steps 1 through 3 occur often throughout the accounting period.

Steps four through 10 occur only at the end of the accounting period.

The accounting process begins with analyzing transactions. The company first looks at the source documents which describe the transactions and events. Source documents can be either hard copy or electronic. Some examples of source documents ...

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