Putting It Together: Recording Business Transactions

In this module, you’ve learned how to identify and use the basic accounting reporting structure and the books of record and how those things relate to each other, from journal entries to ledger to trial balance.

Steps 1 through 4 of the Accounting Cycle. 1. Analyze Transactions 2. Prepare Journal Entries 3. Post Journal Entries 4. Prepare Unadjusted Trial Balance

The double-entry bookkeeping ensures the accuracy of financial reports by putting the emphasis on accuracy with the recording of every single transaction (i.e., for every transaction, the total of the debit amounts must equal the total of the credit amounts). This approach ensures that the accounting equation always remains in balance (i.e., Assets = Liabilities + Owner’s Equity).

By using accounts to summarize the hundreds or thousands of transactions that occur each day, accountants turn data into information that can then be used to create the financial statements.

But the job isn’t done yet.

Bookkeeping is largely a mechanical process, but the next step in the accounting cycle is to take the unadjusted trial balance and to apply critical thinking to the numbers. Are they accurate? Do they fairly represent the results of operations and the financial position of the company? And, are they in accordance with GAAP (or IFRS if you’re an international accountant)?

In the next module, you’ll tackle the next six steps of the accounting cycle, from adjusting entries to the final closing of the books.


A circle with the ten steps in the accounting cycle: 1. Analyze Transactions, 2. Prepare Journal Entries, 3. Post Journal Entries, 4. Prepare Unadjusted Trial Balance, 5. Make Adjusting Journal Entries, 6. Prepare Adjusted Trial Balance, 7. Prepare Financial Statements, 8. Prepare Closing Entries, 9. Prepare Post-Closing Trial Balance, and 10. Create and Post Reversing Entries, if needed.

The Accounting Cycle. Click for a larger image.