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I'd like to talk to you about the accounting cycle.

The accounting cycle is a process that includes six steps that help ensure everything is done properly. By following these steps, I can generate accurate financial statements and close the books with confidence.

In the first step, I collect and analyze events to see if they are transactions that impact the business. Then I gather the source documents that back up those transactions. 

The next step is to record and post all the important information about each transaction. I do this by recording journal entries. In double-entry accounting, every transaction is recorded as both a debit and a credit in two or more subledger accounts.

Once these journal entries are written and approved, I transfer them as summary entries, or “post” them to the general ledger, or GL. The general ledger is like a master record that summarizes all the financial transactions of the business. It contains all accounts and financial records necessary to prepare the financial statements. 

Then, it’s time for me to prepare the unadjusted trial balance. This happens at the end of each period. The recorded transactions are combined into a trial balance. This is the “unadjusted trial balance" as it is prepared before making any adjusting entries. It provides an initial overview of financial information and helps me catch any mistakes made earlier in the accounting cycle. The unadjusted trial balance is considered accurate if the total debit account balances equal total credit account balances.

Next, I prepare adjusting entries to make sure the financial statements are accurate. Usually, it's the job of a CPA or accountant to let me know which adjusting entries I need to make.

Adjusting entries are like fine-tuning the financial statements to accurately reflect how the business is doing. They help ensure that the information included in the statements shows an accurate picture by making sure that revenue and expenses match up within the right accounting periods.

After making the adjusting entries, it’s time for me to prepare the adjusted trial balance. This is a list of the final balances in all accounts. It shows that all the changes and corrections have been accurately recorded and the accounts are in balance. In other words, everything has been properly updated and the financial records are accurate.

Finally, I use the adjusted trial balance to prepare the financial statements. There are four main types of financial statements:

·        The income statement

·        The balance sheet

·        The statement of equity

·        And the statement of cash flows

Financial statements are used to analyze the business’s performance, understand its cash flow, and evaluate its overall financial health. So, that's the six-step accounting cycle. By following these steps, I make sure I accurately record transactions, fix mistakes, and balance the books.