The five accounting cycles are source documents, journals, ledger (T-accounts), trial balance and financial statements. This cycle of action is appropriate for any business, according to Accounting Basics for Students.
Source documents are items such as cash slips, receipts, check counterfoils, bank deposit slips, and invoices that form the source of a transaction. These are the first documents relating to a transaction and the first cycle of the accounting procedure, according to Accounting Basics for Students.
Journals are records of transactions listed in date order. There are different types of accounting journals. The journal is the basic entry of debit and credit for each transaction.
The ledger includes all the journal records relating to one account drawn up into an account for a bank that shows all the relevant transactions. The ledger is sometimes known as "T accounts" due to its shape on a page.
The trial balance is a sheet displaying all the accounts of a business to determine if the total of all debit balances equals the total of all credit balances. It is the final check just before the financial statements are drawn up.
Financial statements, prepared once a year, are the most important reports of a business, states Accounting Basics for Students. They are prepared from information found in the trial balance to show the financial position, financial performance and cash flow of a business. A financial statement consists of an income statement, a statement of equity changes, a balance sheet, a cash flow statement and an auditor's report.