Accounting process is a continuous and systematic working process that begins with the analysis of business transactions and ends with the preparation of post-closing trial balance. According to going concern concept, it is presume that a business organization will run for an indefinite period. But, this indefinite period is divided into small periods to know operating result and financial position of a business organization. Accounting process is a constitutional working process in determining these financial results. These constitutional rules of accounting process require systematic and successive recording of business transactions. The successive working process of accounting method is called accounting cycle. This cycle begins with the analysis of business transactions and ends with the preparation of a post-closing trial balance. The accounting working process starts with identification of transactions and its journalisation. After recording the transactions in journal these are to be classified and posted to ledger accounts. The trial balance is prepared with balances of ledger accounts to prove arithmetical accuracy of accounts. After preparation of trial balance adjusting entries are passed for preparing adjusted trial balance, and there after a worksheet is prepared for convenient preparation of true and fair financial statements. For taking various financial decisions the statements of accounts are interpreted and analysed for providing necessary information. After preparation of financial statements closing entries are passed for closing periodic expenses and income in order to close these and after that a post closing trial balance is prepared finally with which the next year activities start.
The steps in the cycle are performed in sequence and are repeated in each accounting period. Therefore, accounting cycle is a complete accounting process, which starts with identification of transaction and its journalization and reaching final stage of accounting activities step by step and starts next year activities with opening journal entries and again reaches final stage of accounting activities in the same process. This accounting process repeats so long a business exists.
