Question

Which of the statements below is (are) correct regarding the accounting cycle? 

(Check all that apply.) 

• The accounting cycle takes place anytime the general ledger accounts need adjusting. 

• The cycle contains steps for adjusting and closing accounts. 

• The accounting cycle refers to steps followed by a company to prepare its financial statements. 

• The accounting cycle contains 10 steps. 

• The accounting cycle refers to the steps that occur within a company to approve expenses for payment. 

• The accounting cycle is a series of steps repeated each reporting period.

Answer 1

The following are the correct statements 1) The cycle contains steps for adjusting and closing accounts 2)The accounting cycle refers to steps followed by a company to prepare its financial statements 3)The accounting cycle contains 10 steps 4)The accounting cycle is a series of steps repeated each accounting period Thus accounting cycle starts with journalizing of transactions into journal and ends with preparation of post closing trial balance .It involves other steps like journalising entries , preparing ledger accounts , preparation of trial balance, preparation of financial statements ,journalizing and posting closing entries etc. Since these steps are followed to prepare financial statements and hence are repeated each year