Accounting Cycle:

The sequence of accounting procedures used to record, classify and summarize accounting information in financial reports at regular intervals is often termed as "accounting cycle". It includes the following 8 steps;
1. Journal
2. Ledgers
3. Unadjusted Trial Balance
4. Adjusting Entries
5. Adjusted Trial Balance
6. Financial statements
7. Closing Entries
8. After Closing Trial Balance

1. Journal:
Transactions are recorded in chronological order in the journal as both a debit and a credit. Journals may include sales journal, purchases journal and general journal etc.

2. Ledger:
The journal entries are transferred to the appropriate accounts in the ledger. The ledger accounts may be in the form of T-account method or running balance method.

3. Unadjusted Trial Balance:
Unadjusted trial balance is a calculation to verify the sum of the debits is equal to the sum of the credits.

4. Adjusting Entries:
In this step, adjusting entries are passed to match the proper revenue with expense in that period because under accrual accounting system, revenue is recorded when earned and expenses are recorded when incurred.

5. Adjusted Trial Balance:
After making necessary adjustments adjusted trial balance is prepared. Adjusted trial balance is the listing of balances of accounts in order of assets, liabilities, owner's equity, revenue and expenses.

6. Financial Statements:
Financial statements are prepared using the corrected balances from the adjusted trial balance. The financial statements are;
  i.   Income Statement
  ii.  Statement of Retained Earning
  iii.  Balance Sheet
  iv. Cash Flow Statement
  v.  Statement of Changes in Equity

7. Closing Entries:
In this step closing entries are passed to close the balances of temporary accounts e.g. revenue and expenses.

8. After Closing Trial Balance:
After closing trial balance will show only permanent accounts e.g. assets, liabilities, and owner's equity.