Frequently Asked Questions
What is an accounting cycle?
An Accounting Cycle is a sequence of events, each involving one or more transactions and led by an entity's internal process of recording and summarizing business events and adjusting and closing accounts to reflect the results of the business.
How long is an accounting cycle?
Generally speaking, an Accounting Cycle is a one-year period. However, as more and more companies are using various software programs to conduct their business, increasing numbers of these firms have been choosing to cut the length of the Accounting Cycle from 12 months down to nine months or even less.
Why is the accounting cycle important?
Without an Accounting Cycle, managers and investors would not be able to make meaningful comparisons of a company's performance and financial position over time. The Accounting Cycle is important because it allows users of Financial Statements to make valid comparisons of past performance and the current status of the business.
What are the four phases of accounting?
The four phases of accounting are recording, posting, analysis, and disbursement.
What is the most important step in the accounting cycle?
The most important step in the Accounting Cycle is the recording of economic events. For a company to keep track of its financial condition, it must document these events as they occur.