Which description best characterizes the accounting cycle?

Which description best characterizes the accounting cycle?

• A. A one-step process for recording transactions
• B. A series of steps including identifying, recording, classifying, and summarizing transactions
• C. Only a year-end activity
• D. An external auditing procedure

Answer: (B)

The accounting cycle is an ongoing sequence of steps that takes raw transaction data and turns it into financial statements. The best description here captures that flow: a series of steps including identifying, recording, classifying, and summarizing transactions. It starts with identifying the actual transactions from source documents, moves through recording them in journals, posting to ledgers, and then summarizing through trial balances and financial statements. This cycle repeats for each period, not just at year-end, and is a internal process focused on processing and reporting information. It isn’t an external auditing procedure, which is a separate activity that verifies the records after they’re prepared.

The accounting cycle is an ongoing sequence of steps that takes raw transaction data and turns it into financial statements. The best description here captures that flow: a series of steps including identifying, recording, classifying, and summarizing transactions. It starts with identifying the actual transactions from source documents, moves through recording them in journals, posting to ledgers, and then summarizing through trial balances and financial statements. This cycle repeats for each period, not just at year-end, and is a internal process focused on processing and reporting information. It isn’t an external auditing procedure, which is a separate activity that verifies the records after they’re prepared.