![]() ![]() It is a simple equation that shows the relationship of multiple items in a company’s balance sheet. Each business transaction journalized via a double entry system will affect the accounting equation. The accounting equation is the bedrock of the double-entry bookkeeping system. To identify whether a transaction has an economic impact, it should be analyzed through the accounting equation. We also have an accompanying spreadsheet that shows you an example of each step.Ĭlick here to download the Accounting Cycle template Understanding the Accounting Equation Below is the complete list of accounting cycle tutorials: Throughout this series on the accounting cycle, we will look at an example business, Bob’s Donut Shoppe, Inc to help understand the concepts of each part of the accounting cycle. A General journal is a daybook or a master journal in which all company transactions that occur during an accounting cycle are recorded. This step starts at the beginning of the accounting cycle and lasts throughout the period.Īfter identifying which transactions have an economic effect, the bookkeeper will journalize these entries in the general journal. The process involves analyzing business transactions to determine whether a certain transaction has an economic impact on the company’s books. Journal entries are usually the first step of an accounting cycle.
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