Accounting Cycle

Accounting cycles is a procedure, used by companies or organizations to record transitions and prepares their financial statements (Kieso, Weygandt, & Warfield, 2007). The accounting cycle has eight main steps and two optional steps. The first step is, (1) identification and measurement of transactions and other events, (2) journalization, (3) posting, (4) trial balance preparation, (5) adjustments, (6) adjusted trial balance, (7) statement preparation, (8) closing, (9) post-closing trial balance (optional), and (10) reversing entries (optional) (Kieso, Weygandt, & Warfield, 2007). Companies use the accounting cycle to stay on track, Harrison Plumbing and Heating Incorporation also follows the accounting cycle. I will explain each step and what Harrison Plumbing and Heating does also.

Identifying and recording transactions and selected other events, determine what to record. “Although GAAP provides guidance’s, no simple rules exist that state which events a company should record.” Companies should record all cash sales or purchases, no matter how small” (Kieso, Weygandt, & Warfield, p. 68, 2007). Events are two types, external events and internal events. External events are change in the price of good or service that an entity buys or sells. Internal events ocferring and consuming raw materials in production processes (Kieso, Weygandt, & Warfield, 2007). Harrison Plumbing and Heating Incorporation doe’s services in plumbing, heating, new construction and service work. Our raw materials are boilers, pressure tanks, hot water tanks, and miscellaneous parts and fittings.

Journalizing is to record their accounts that affect their assets, liabilities, and equities. This could be a general journal, cash receipts, cash disbursement journal, purchases, and sales (Kieso, Weygandt, & Warfield, 2007). Harrison Plumbing and Heating Inc. use QuickBooks to record our sales, purchases, and cash journals in QuickBooks.

Posting is the procedure of transferring journal entries to the ledger accounts (Kieso, Weygandt, & Warfield, 2007). Harrison Plumbing and Heating Inc. print all invoices that were done in the current month. We keep all the receipts and check stubs, for gas, any job materials purchased, and others. I then take the receipts and invoices that month to the accountant. The accountant then put all our receipts and invoices into the computer.

Trial balance is the lists