All accountants must follow a process established by accounting laws and regulations which help them carry out their work with greater precision, accuracy and order.
The accounting cycle is the orderly and systematic process of accounting records, from the preparation of accounting vouchers and bookkeeping to the preparation of Financial Statements.
Accounting cycle scheme
The accounting cycle consists of the following parts:
1. Opening
When the company is established, the accounting process begins with the contributions of the owner or partners registered in the initial general inventory. With the initial general inventory, they are prepared in the initial Balance Sheet and the daily accounting voucher, called the opening voucher that serves to open the main and auxiliary books.
2. Movement
The commercial transactions that a company carries out daily must be supported by a support that allows its registration in the daily receipt and transfer to the main and auxiliary accounting books.
The registration of the operational movement of the company, according to its needs, can be done on a daily, weekly, biweekly or monthly basis, in daily receipts and books. At the end the Trial Balance is drawn up.
The public accountant and his assistants must constantly verify and evaluate that the accounting cycle is fully complied with
3. Close
At this stage the following is elaborated:
A. Adjustment entry: Registered in the daily accounting voucher, called adjustment voucher, which transfers to the main and auxiliary books.
B. Worksheet: is carried out optionally every month and serves as the basis for preparing the Financial Statements such as the Balance Sheet and Income Statement.
C. Proof of closure: It is prepared annually to cancel the nominal or income accounts and is transferred to the main and auxiliary books.
The final general inventory and the consolidated balance sheet, prepared in the closing stage, constitute the initial general inventory and the initial balance sheet to begin a new accounting cycle.
Not having the information at the right time can unleash a series of problems that in the long term will affect the proper functioning of the company, but especially with financial and managerial decision-making.
