Accounting Cycle

In accounting, it is really important to understand the accounting cycle first. Normally the accounting cycle comprises of the following steps:

=> Transaction (Economic activity affecting the entity)

=> Voucher (The record of an economic event in written)

=> Journal (First book of accounting)

=> Ledger (Posting the transaction from ledger)

=> Trial Balance (List of ledger balances)

=> Statement of the profit or loss and other comprehensive income (Recording the income and expenses of the business to derive the profit or loss figure for a specific period)

=>Statement of Financial Position (The record of assets and liabilities and equities at the particular date)


Whenever any transaction is occur in the business, we prepare a voucher for that transaction. We record the transaction in the journal with the help of the voucher. Then we are posting that transaction into the ledger from the journal to their respective accounts. After the end of the particular period, we get some debit/credit balances. With the help of these balances, we make a trial balance which helps us in the preparation of profit or loss and other compressive income and thereafter statement of financial position once we derive the profit or loss figure from the statement of profit or loss and other comprehensive income.