The accounting cycle is the route a transaction takes from an invoice to the financial statements. This page shows one transaction moving through every stage, and points to the lessons that deal with the places students lose it.
It builds on double entry and ledgers and looks ahead to the trial balance.
What does one transaction look like at each stage?
Take an original transaction: on 6 May, Bunga Supplies invoices a shop RM1 800 for goods.
| Stage | What happens to the RM1 800 |
|---|---|
| Source document | The invoice is received and checked |
| Book of prime entry | Recorded in the purchases journal |
| Ledger | Debit Purchases, credit Bunga Supplies |
| Trial balance | Purchases is a debit balance, Bunga Supplies a credit balance |
| Financial statements | Purchases enters the trading account, and any unpaid amount is a creditor on the statement of financial position |
Every stage uses the same amount and the same two accounts. If one stage is wrong, every later stage inherits the error.
How do the four lessons help?
- Following a credit purchase from source document to ledger and statement walks the route above in full.
- Separating business spending from drawings shows what happens to profit when a personal payment is coded as an expense.
- Explaining the two-sided effect using the accounting equation proves each transaction keeps the equation balanced.
- Tracing a returned item without reversing unrelated entries shows how to undo only the part that changed.
Who should start where?
A student who is new to the cycle should read the credit purchase lesson first. A student who already posts correctly but misstates profit should go to the drawings lesson. A student who answers theory questions on effects should start with the accounting equation.
Finish with the integrated practice set. For a teacher who traces your own transactions, see online one-to-one Accounting tuition.