What is the accounting cycle?

An accounting cycle is the period of time established for each fiscal year that serves to divide the phases or stages of business accounting.

The objective of an accounting cycle is none other than to detect the health of a company to find out if the financial and equity data are met.

Phases and stages of the accounting cycle

The structure of an accounting cycle, which normally lasts one year and the phases of an economic cycle have a strictly fixed start and end date. Thus, during the development of the activity its purpose is to measure the productivity of the company, income, accounts, earnings etc. These are the most important stages of an accounting cycle:

  • Opening: is when a new accounting cycle begins. For this, data related to assets, liabilities and equity belonging to the situation balance among other documents.
  • Development: it is the period of time that elapses between the opening and the closing. The use of Diary book collect the information instantly.
  • Corrections: in this period, each and every transaction is checked to ensure that they are real and faithful to the company.
  • Closing: is the end of the accounting year. The accounts and the management results will be tested to find out what the final result of the financial year has been.

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