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)
EXPLANATION OF THE ACCOUNTING CYCLE
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.