Accounting Cycle
Accounting Cycle
The cycle is an evidence pipeline
Each stage answers a different control question:
| Stage | Control question |
|---|---|
| Source | Did an authorised event occur, and what are its terms? |
| Journal | Was the event classified and dated correctly? |
| Ledger | What is the balance and transaction history by account? |
| Trial balance | Are debit and credit totals arithmetically equal? |
| Adjustment | What is incomplete, estimated or in the wrong period? |
| Statements | Are balances classified, aggregated and disclosed appropriately? |
Northstar month-end
Use the entries from Double-Entry, then add:
| Adjustment | Debit | Credit |
|---|---|---|
| One month’s equipment depreciation, £1,000 | Depreciation expense 1,000 | Accumulated depreciation 1,000 |
| Electricity used but not billed, £1,500 | Electricity expense 1,500 | Accrued expenses 1,500 |
| Customer service delivered from a prior advance, £2,000 | Contract liability 2,000 | Service revenue 2,000 |
Notice that none of these adjustments requires cash at month-end.
Run the ledger check
Edit an amount or add an entry. The cell aggregates balances and refuses an unbalanced journal.
Northstar journal-to-trial-balance check
The cell proves arithmetic balance only. It cannot determine whether £70,000 should be PPE or expense; that requires event analysis and evidence.
Errors a trial balance will not find
- omitting an event entirely;
- using the wrong but same-side account;
- recording the same wrong amount on both sides;
- recording in the wrong period;
- failing to make an estimate or impairment adjustment.
Closing versus adjusting
Adjusting entries make period-end balances complete and properly timed. Closing entries reset temporary income and expense accounts after reporting and transfer the period result to equity. Do not close assets, liabilities or equity balances that continue.
Quick check
A £1,500 accrual was omitted. The trial balance still agrees. Which two reports are likely misstated?