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4.3: The accounting cycle summarized

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  • In Chapter 1, you learned that when an event is a measurable business transaction, you need adequate proof of this transaction. Then, you analyze the transaction's effects on the accounting equation, Assets = Liabilities + Stockholders' equity. In Chapters 2 and 3, you performed other steps in the accounting cycle. Chapter 2 presented the eight steps in the accounting cycle as a preview of the content of Chapters 2 through 4. As a review, study the diagram of the eight steps in the accounting cycle in Exhibit 19. Remember that the first three steps occur during the accounting period and the last five occur at the end. The next section explains how to use the work sheet to facilitate the completion of the accounting cycle.

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