Question

2 - basic accounting procedures

learning objective: recognize the steps in the accounting process.

what is the initial step in the accounting cycle?

a.) recording journal entries in the ledger

b.) reviewing and recording financial transactions

c.) closing temporary accounts

d.) preparing financial statements

Explanation:

Identify the core question

The question asks for the initial (first) step in the accounting cycle.

Analyze the accounting cycle steps

The accounting cycle is a collective process of identifying, analyzing, and recording the accounting events of a company. The standard steps in order are:

1. Identify and analyze transactions (source documents).
2. Record transactions in a journal (journal entries).
3. Post journal entries to the general ledger.
4. Prepare an unadjusted trial balance.
5. Analyze the trial balance and make adjusting entries.
6. Prepare an adjusted trial balance.
7. Prepare financial statements.
8. Close temporary accounts (closing entries).
9. Prepare a post-closing trial balance.

Evaluate the given options

• a.) Recording journal entries in the ledger: This is a combination of step 2 and step 3, which occurs after transactions are identified and analyzed.
• b.) Reviewing and recording financial transactions: This represents the very first phase where business activities are identified, analyzed/reviewed, and then recorded.
• c.) Closing temporary accounts: This is one of the final steps in the cycle (step 8).
• d.) Preparing financial statements: This occurs near the end of the cycle (step 7), after adjustments are made.

Connect to mastered concepts

Using the Financial Accounting knowledge point, we know that before any entry can be made in a journal or posted to a ledger, a bookkeeper or accountant must first identify, review, and analyze the financial transactions using source documents (like receipts, invoices, or bank statements). Therefore, reviewing and recording transactions is the initial step.

Answer:

• a.) Recording journal entries in the ledger
• b.) Reviewing and recording financial transactions (Correct answer)
• c.) Closing temporary accounts
• d.) Preparing financial statements