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Pages:
2 pages/≈550 words
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Style:
APA
Subject:
Business & Marketing
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Language:
English (U.S.)
Document:
MS Word
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Topic:

How Accounting Cycles Work

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In this short paper, you will evaluate the importance of the accounting cycle by illustrating the products of that cycle and identifying the potential for problems if it is not properly followed. There is only one short paper assignment in this course, and it has a unique purpose: You can think of this exercise as establishing the conceptual framework for your remaining work in the problem sets and Final Project I. Essentially, in those activities, you will be engaging in the specific tasks of the accounting cycle and applying detailed processes on a practical level. Therefore, it is important to grasp the larger picture in this short paper so that you will be able to connect these smaller tasks and details and recognize their larger significance.
What are the steps of the accounting cycle? Describe each in your own words using specific examples.
 What are the outputs of the accounting cycle? Why are they important? Identify and explain the purpose of each financial statement, including how they are interrelated.
 Why is the accounting cycle important to a business? Evaluate the significance of the accounting cycle in terms of its practical relevance for businesses.
In your response, be sure to give specific examples of why certain steps are necessary. Address at least three different steps in your evaluation.
It should be a 2- to 3-page Microsoft
Word document with double spacing, 12-point Times New Roman font, one-inch margins, and references to the textbook content cited in APA format.

Other (Not Listed) Sample Content Preview:

The Accounting Cycle
Name
Institutional Affiliation
The Accounting Cycle
Accounting cycles (ACs) are important in any business setting to ensure appropriate updates and maintenance of all accounts. The management of a business will be able to understand and keep the company’s finances balanced since they will be able to address any payments owed (Franklin, Graybeal & Cooper, 2019). The cycle helps busy business owners and bookkeepers to handle different accounting activities while ensuring accuracy, consistency, and efficiency in analyzing business performance. The final products of any AC are the FSs which include balance sheets or statements of financial position, income statement (IS) or statement of performance, and statements of changes in equity. There are potential problems for a business if the AC is not properly followed. These issues include flaws in the process of financial reporting due to dependence on the steps of the cycle, failure to detect inaccurate information, and challenges in updating and monitoring of transactions. It will also be difficult to realize a smooth transition to another accounting period since the cycle prepares the business for a fresh period.
The basic steps of the AC include transaction identification and analysis, transaction journaling, posting in ledgers, preparation of unadjusted and adjusted trial balance, preparing financial statements (FS) such as ISs, balance sheets, retained earnings, and statement of cash flows, and closing the books or entries (CFI Education Inc., 2020). In the identification stage, companies often record each transaction using point-of-sales matched with their books. The second step involves journaling each transaction while tracking expenses. Posting in general ledger then follows to allow monitor...
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