A Beginner’s Guide to The Accounting Cycle

Financial statements are critical to your business. Without them, you wouldn’t be able to do things like plan expenses, secure loans, or sell your business.

But how do they get created? Through the accounting cycle (sometimes called the “bookkeeping cycle”).

The accounting cycle is a multi-step process designed to convert all of your company’s raw financial information into financial statements.

What’s the purpose of the accounting cycle?

The proper order of the accounting cycle ensure that the financial statements your company produces are consistent, accurate, and conform to official accounting standards (such as IFRS and GAAP).

In short, the concept of an accounting cycle makes sure that all of the money passing through your business is actually “accounted” for.

If you need a bookkeeper to take care of all of this for you, reach out to us. We’ll do your bookkeeping each month, and produce simple (and beautiful) financial statements that show you the health of your business.

Steps of the accounting cycle

There are lots of variations of the accounting cycle. Some have eight, nine steps, or even ten steps. For simplicity’s sake, we’re going to divide it into six steps.

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