The accounting cycle is a bookkeeping process that every organization uses, whether it is a small business or a large corporation. Each debit and credit transaction that occurs has to be transformed into an overall financial statement. When you put these accounting principles into practice, all financial activities can be recorded well. When you hire bookkeeping services in Adelaide, it follows nine fundamental steps in the process.
#1 Indentify all business transactions
It is important to identify all business transactions first. It brings the highest level of accuracy to the system, and you do not lose anything.
#2 Record each transaction
Next important thing is to record the transaction. If each transaction is recorded in chronological order, then it aligns with the principle of accrual accounting. Either the affected accounts can be notated in a general record or several discrete records.
#3 Resolve anomalies
In a double-entry system, every transaction is recorded twice, as debit and credit. This type of accounting makes things easier. It is because closing entries of the accounting cycle becomes easy.
#4 Posting entry to the general ledger
Every entry is posted to a ledger account that encompasses everything, the credit and debit balance. Ledger keeps every transaction in a single place, and it gives easy reference. A bookkeeping Adelaide agency maintains the ledger in a clean and systematic manner.
#5 Calculate the unadjusted trial balance
Your general ledger gives you the unadjusted trial balance when you input all the relevant information from the accounting process.
#6 Resolve miscalculations if any
You should review the ledger and journal entries line by line to check for errors. When you adjust journal entries, it is necessary to generate an adjusted trial balance.
#7 Consider extenuating circumstances
The final balance has to consider tax deductions like depreciation, deferrals, and so on.
#8 Create a financial statement.
You are supposed to prepare a financial statement at the end of the accounting period. It should include adjusted trial balance and other relevant individual income statements, balance sheets, and other cash inflow systems. Hire an expert bookkeeping services in Adelaide if you are not confident.
#9 Book closing
The last step of the nine-steps of basic bookkeeping would be closing the books. It is done after arriving at the post-closing trial balance. You will take time to transfer the information from the temporary accounts to permanent accounts. At this point, the accounting cycle ends only to begin with the next accounting period again.
These are the nine steps of bookkeeping.