In accounting certain steps are to be followed which are repeated year after year. These are:
- Recording of transactions and events in the books of accounts- journalising;
- Grouping of similar items and transferring to their respective account – posting;
- Summarising the accounts – balancing;
- Checking the arithmetical accuracy – preparing the trial balance;
- Adjusting the unrecorded items – passing adjustment entries;
- Closing books of account to find out the result – preparing final accounts.
All these above steps constitute accounting cycle.