FABM 1 – Fundamentals of
Accountancy, Business, and
Management 1
Lesson 4: The Accounting Cycle
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I. Lesson Objectives:
- Define the accounting cycle.
- Explain each step in the accounting cycle.
- Demonstrate the process of recording and summarizing transactions through the
accounting cycle.
II. Key Concepts and Explanations:
A. Definition of Accounting Cycle
The accounting cycle is the complete process of identifying, recording, and summarizing
business transactions. It ensures that financial reports are accurate and complete.
B. Steps in the Accounting Cycle
1. Identifying and Analyzing Transactions
2. Recording in the Journal (Journalizing)
3. Posting to the Ledger
4. Preparing an Unadjusted Trial Balance
5. Making Adjusting Entries
6. Preparing an Adjusted Trial Balance
7. Preparing Financial Statements
8. Making Closing Entries
9. Preparing a Post-Closing Trial Balance
III. Activities/Exercises:
Activity 1: Arrange the Steps
Arrange the following accounting cycle steps in their correct order:
A. Preparing financial statements
B. Journalizing transactions
C. Making closing entries
D. Posting to the ledger
E. Identifying and analyzing transactions
F. Preparing a post-closing trial balance
G. Preparing an unadjusted trial balance
H. Making adjusting entries
I. Preparing an adjusted trial balance
Activity 2: Concept Matching
Match the step to its description:
1. The process of summarizing debit and credit balances in the general ledger.
2. Recording financial events in chronological order.
3. Creating reports such as the income statement and balance sheet.
4. Ensuring account balances reflect all revenue and expenses before statement preparation.
5. The initial recognition of business transactions.
IV. Assessment/Quiz:
1. What is the first step of the accounting cycle?
A. Journalizing
B. Adjusting entries
C. Identifying transactions
D. Preparing financial statements
2. Which document lists all accounts and their balances after posting?
A. Journal
B. Adjusted Trial Balance
C. Unadjusted Trial Balance
D. Ledger
3. What is the purpose of adjusting entries?
A. To close temporary accounts
B. To ensure accounts reflect correct balances
C. To list debits and credits
D. To post entries to ledger
4. Which step follows after preparing financial statements?
A. Posting to ledger
B. Closing entries
C. Adjusting entries
D. Trial balance
5. Which step ensures temporary accounts start at zero in the new accounting period?
A. Posting
B. Adjusting
C. Journalizing
D. Closing entries
V. Answer Key:
Activity 1 Correct Order: E, B, D, G, H, I, A, C, F
Activity 2:
1. Trial Balance
2. Journalizing
3. Financial Statements
4. Adjusting Entries
5. Identifying Transactions
Assessment/Quiz:
1. C
2. C
3. B
4. B
5. D
