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This post discusses the accounting cycle.

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What are steps of the accounting cycle?

Why is it necessary to make adjusting entries at the end of each accounting period?

What would happen if all steps were not completed in a specific period?

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Solution Summary

This solution provides a detailed discussion of the accounting cycle, why it's necessary to make adjusting entries at the end of the accounting period, and what would happen if all steps were not completed in a specific period.

This solution is written based on 25+ years of professional accounting experience.

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What are steps of the accounting cycle?

The steps in the accounting cycle are as follows:

1. The transaction that needs to be recorded is identified.

2. The amount of the transaction or transactions is identified, along with the appropriate account or accounts that the transaction should be recorded in.

3. The transaction is then recorded in the accounting transaction journal as a debit to one account, and a credit to the offsetting account. (Example: debit to expense account, credit to cash).

4. In the next step, the journal entries are posted to the accounting ledger.

5. A ...

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