To understand accounting properly, you need to know the accounting cycle. The financing cycle is a series of events when an accountant produces financial reports.
In practice, the number of steps may vary depending on other sources. This is not a problem because it will eliminate the essence of the cycle.
As long as it continues to accompany the analysis of transactions, transaction journals, ledgers, trial balances and financial reports.
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Financial Cycle Is: These are the 5 Steps
As an important process, the financing cycle is something that must be considered to produce accountable financial reports.
The following are 5 steps in the financial cycle that occur in economic activities, namely:
Transaction Analysis
Business transactions are economic events that are always recorded by accountants, they can come from outside or inside the company.
However, it should be understood that not all economic events are records of business transactions. There are 5 types of business transactions, including:
- Transactions related to capital participation.
- Transactions relate to asset purchases.
- Transactions related to economic benefits.
- Transactions relate to the receipt of income.
- Transactions related to load consumption.
Transaction Journal
After receiving economic events in the form of business transactions, an accountant must record them in a notebook according to chronology.
This record is called a transaction journal, while the activity is called posting.
Ledger
The next step of the accounting cycle is the general ledger. The transition from step two to step three is called the posting process.
Accounting staff who want to see the ledger they have created just look for the post button on the electronic system.
Then, a ledger will automatically be formed. Basically, all journals formed will be grouped into several tables according to their respective accounts.
Trial balance
Creating a trial balance or work sheet is the fourth step which aims to verify whether the debit and credit balances agree.
The trial balance will show all accounts in tabular form. Including showing the final balance of the ledger for each account.
Adjusting journal entry
Some events involving economic transactions require adjustments. Adjusting journals have several functions, namely:
- An income statement that can report income during the accounting period.
- The balance sheet also reports receivables at the end of the accounting period.
- The income statement also reports costs and losses.
- The balance sheet reports liabilities at the end of the accounting period.
It can be concluded that the financing cycle is an important part of economic activity, therefore Telkom University studies it.
