2.2 Accounting Cycle

The accounting cycle is the accounting procedures （or steps） in preparing financial statement. The reason for the name of cycle is that the procedures are repeated during each reporting period by the same sequence. The accounting cycle starts with analyzing transactions and ends with preparing financial statements.

The accounting cycle generally consists of the following procedures.

（1） Analyzing transactions and events as they occur.

（2） Journalizing transactions in a journal.

（3） Posting journal entries to the appropriate ledger.

（4） Preparing an unadjusted trial balance.

（5） Preparing adjusting journal entries and posting them to the ledger.

（6） Preparing an adjusted trial balance.

（7） Preparing closing journal entries and posting to the ledger.

（8） Preparing post-closing trail balance.

（9） Preparing financial statements.

（10） Preparing reversing entries in the next period if necessary. This is an optional step.

To have a better illustration of the procedures in an accounting cycle, we show these steps in the Exhibit 2-1.

journal ['dʒɜːn（ə）l] 日记账

ledger ['ledʒə] 分类账

close [kləʊs] 结账

post [pəʊst] 过账

Exhibit 2-1 the Accounting Cycle