Accounting cycle is a process of identifying, analyzing, and recording financial transactions within a company. This is the cycle where accountants should follow to post their company’s transactions. One accounting cycle could consist 8 – 11 steps. If you are an accountant student and want to learn this cycle, you can use this accounting cycle template to help you understanding how this cycle works.
This accounting cycle for service business template is a basic template in Microsoft Excel format. There is only one journal, general journal, to input all transactions. Before learning how to the accounting cycle works for merchandising or manufacturing business, you should understand how it works on service business first.
This template uses 10 steps to cycle all the transactions. Those steps are :
- Transaction pool
- Journal entries
- General ledger
- Unadjusted trial balance
- Adjusting journal entries
- Adjusted trial balance
- Financial statements
- Closing entries
- Post trial balance
- Reversing entries
In service industry, there are only revenue part and operating expenses part that you can see in Income Statement. There is no inventory part.
Lets break down each cycle in this service industry samples.
1 Transaction Pool
This is the place to identify each transactions. You need to identify them as cash or receivable or payable transactions. And, their transaction purposes.
2 Journal Entries
Once you have identified them, you can start write those transactions in general journal. Do not forget to write them twice. This journal uses double-entry bookkeeping system. Place the amount in correct Debit and Credit columns. Then, classify them by selecting the correct Chart of Account codes.
3 General Ledger
Here, you can check each account balance. They have debit and credit format.
4 Unadjusted Trial Balance
Trial balance is a table where all journal data will be summarized in debit or credit side. You can specify them in Chart of Account worksheet. Unadjusted means raw or data are just being summarized as written in general journal.
5 Adjusting Journal Entries
Here, you need to specify several transactions that cannot be posted in reference to accounting policy. Samples are prepaid revenue, expenses, supplies and depreciation. You need to distribute them to corresponding month correctly.
6 Adjusted Trial Balance
Now, you have your data summary in proper places. This data will be used as reference to generate profit and loss statement as well as balance sheet statement.
7 Financial Statements
In accounting, there are four financial statements that are usually generated. Those are income, balance sheet, cash flow and equity statements.
8 Closing Entries
Accountants use this journal to move all net profit/loss balance into owner’s capital accounts. They need to do that to make sure there is no profit and loss balance being carried over to the next fiscal year book.
9 Post Trial Balance
It has similar format with trial balance table. But, you won’t see any balance in profit and loss accounts.
10 Reversing Entries
If there are balances that are need to be carried over or adjusted in the next book, then this is the journal to adjust it. It has similar journal format with other journal entries format.
Accountants are usually follow steps 8 – 10 at the end of current fiscal year. Because those steps are connected to the next fiscal year book.
You have completed one full accounting cycle. Now, you can repeat it again until one full fiscal year before you are closing your current book.
Below is the accounting cycle for service company template in Excel format. Try to play around with those modules. Samples are included.
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