Glossary
Accounting cycle
The sequence of steps from recording transactions to producing the financial statements.
What it means
The recurring process of recording, classifying and summarising transactions through to the trial balance and financial statements each period.
Example
Source document, book of prime entry, ledger, trial balance, then the financial statements.
Why it matters
Understanding the cycle shows how a receipt becomes part of the reported profit.
In practice
The accounting cycle is a process that repeats every period. It starts when a transaction is identified. It is entered in the books of prime entry, posted to the ledger, and then a trial balance is extracted. Adjustments such as accruals and depreciation follow. Finally the income statement and statement of financial position are prepared and the books are closed.
For example, a sale of RM800 on credit is first recorded in the sales day book. It is then posted to the sales account and the customer's account. Eventually its effect flows into revenue and trade receivables.
Students often confuse the cycle with the trial balance. The trial balance is one step within the cycle, a checkpoint that tests whether debits equal credits. The cycle is the whole sequence around it. Knowing the order helps you see why an error made early carries through to the final statements.
If the steps feel like separate topics, one of our teachers can show you how they connect, using one transaction followed from start to finish. Book a trial class.
Related terms
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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