What is Accounting Cycle?

Accounting Cycle can be defined as the name given to the collective and step-by-step process of recording and processing, classifying and summarizing the accounting events or economic transactions of a company. The series of steps starts when a transaction happens and ends with its inclusion in financial statements. It is a set of rules designed to ensure the accuracy and conformity of financial statements. Computerized accounting systems have helped decrease mathematical mistakes in accounting but the uniform process of accounting cycle also too assists in reducing errors.
Accounting Cycle provides useful information in the form of income statement, balance sheet, shareholders equity and cash flow statement. As per “Time Period” accounting principle, accounting cycle is followed once during each accounting period. Accounting cycle is also called “Bookkeeping Cycle”.