Navigating the financial landscape can be a challenge, especially if you’re setting up your first startup or running a small business. Among the many tasks that demand your attention, understanding and managing the accounting cycle stands out as critical and necessary.
This cyclical process involves identifying, recording, analyzing, and reporting your company’s monetary transactions in a systematic manner. In this guide, we’ll unravel its intricacies.
What is the Accounting Cycle?
The accounting cycle is a series of steps that businesses follow to record financial transactions and create accurate, reliable financial statements. Your recording requirements will determine the length of your accounting cycle, but most cycles will go through the same simple steps.
There are a few great reasons why you’d want to implement an accounting cycle:
- An accounting cycle will help you analyze the performance of your company.
- An accounting cycle can help you raise additional capital for your company.
- An accounting cycle will ensure that you follow your state’s laws and regulations.
Some businesses will only need 5 steps, while others require up to 10. However, we’re going to look at the 8 main steps you need to take. Make sure to add more if you need more wiggle room.
