What is Accounting Cycle?

The Accounting Cycle is a standard, eight-step process that a company repeats each accounting period to identify, analyze, and record its financial transactions. It ensures that the financial statements are prepared consistently and accurately. The cycle begins with the initial recording of a transaction and ends with the closing of the books for that period.

For Startups: Understanding the accounting cycle is crucial for implementing a robust financial system. Automating these steps with cloud accounting software is key for startups to maintain accurate records without a large in-house finance team. It provides a reliable rhythm for financial reporting, whether monthly or quarterly, which is essential for monitoring performance and reporting to investors.

The 8 Steps: 1) Identifying Transactions, 2) Recording in a Journal, 3) Posting to the General Ledger, 4) Unadjusted Trial Balance, 5) Adjusting Entries, 6) Adjusted Trial Balance, 7) Financial Statements, 8) Closing Entries.