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The accounting cycle includes analysis of transactions, transferring journal entries into a general ledger, revenue, and expense closed. LEARNING OBJECTIVE [ edit ] Outline the accounting cycle from point of transaction to financial statements KEY POINTS [ edit ] When a transaction occurs, a document is produced. Most of the time these documents are external to the business, however, they can also be internal documents, such as inter-office sales. These documents are referred to as a source document. The Journal entries are then transferred to a Ledger. The group of accounts is called ledger, or a book of accounts. The purpose of a Ledger is to bring together all of the transactions for similar activity. Financial statements are drawn from the trial balance which may include: the Income statement, the Balance sheet, and the Cash flow statement. 3. prepare trial balance 4. post adjusting entries 5. prepare adjusted trial balance 6. prepare financial statements 7. post closing entries 8. prepare a post closing trial balance TERM [ edit ] Journal entries A journal entry, in accounting, is a logging of transactions into accounting journal items. The journal entry can consist of several items, each of which is either a debit or a credit. Give us feedback on this content: FULL TEXT [edit ] When a transaction occurs, a document is produced. Most of the time these documents are external to the business, however, they can also be internal documents, such as inter-office sales. These documents are referred to as a source document. Some examples are: the receipt you get when you purchase something at the store, interest you earned Register for FREE to stop seeing ads on your savings account which is documented in your monthly bank statement, and the monthly electric utility bill that comes in the mail. These source documents are then recorded in a Journal. This is also known as a book of first entry. It records both sides of the transaction recorded by the source document. These write-ups are known asJournal entries. These Journal entries are then transferred to a Ledger, which is the group of accounts, also known as a book of accounts. The purpose of a Ledger is to bring together all of the transactions for similar activity. For example, if a company has one bank account, then all transactions that include cash would then be maintained in the Cash Ledger. This process of transferring thevalues is known as posting. Once the entries have all been posted, the Ledger accounts are added up in a process calledBalancing. A particular working document called an unadjusted Trial balance is created. This lists all the balances from all the accounts in the Ledger. Notice that the values are not posted to the trial balance, they are merely copied. At this pointaccounting happens. The accountant produces a number of adjustments which make sure that the values comply with accounting principles. These values are then passed through the accounting system resulting in an adjusted Trial balance. This process continues until the accountant is satisfied. Financial statements are drawn from the trial balance which may include: the Income statement, the Balance sheet, and theCash flow statement. Finally, all the revenue and expense accounts are closed.