Accounting Cycle Review

Key Takeaways

• The accounting cycle transforms business transactions into financial statements.
• Transactions are recorded using the double-entry accounting system.
• Journal entries are posted to the general ledger before preparing the trial balance.
• Adjusting entries apply accrual accounting principles.
• Financial statements are prepared using the adjusted trial balance.
• Closing entries reset temporary accounts for the next accounting period.
• The post-closing trial balance contains only permanent accounts.
• Balanced debits and credits do not guarantee error-free accounting records.

The accounting cycle is the roadmap that turns everyday business activity into meaningful financial information.