Question

What are the outputs of the accounting cycle and why are they important?

Answer 1

There are three major outputs in the accounting cycle. They are the income statement, balance sheet, and the statement of retained earnings. The income statement derives from the revenue and expense transactions for that current period that is being entered the journal. To find the information for the income statement you will use the adjusted trial balance. To make sure that your entry is correct by performing the optional end-of-period spreadsheet is very useful to make sure no errors have occurred. Once the Income Statement is prepared it allows to see you have a Net Gain or Net Loss. The next output is Retained Earnings, this statement shows how much a company chooses to keep then distribute among the shareholders. Lastly, is the balance sheet this capture assets, liabilities, and stockholder’s equity. This does not have the overall detailof line by line, but captures the whole account period. By following the step of the account cycle you are capturing all expenses, assets, liabilities, revenue among many more things. This processis useful to help a company discover errors while developing a journal of the that year’s statements.The accounting cycle is a very useful tool for companies and businesses of all magnitude.It allows them to track their success and failures and how to budget better. Even though there is an optional step, it could be a crucial step to make sure no errors have occurred.