The first step in the accounting cycle is?

The First Step in the Accounting Cycle

The first step in the accounting cycle is identifying and analyzing transactions. This involves recognizing business transactions that occurred during a specific period and determining how these transactions should be recorded.

In detail, this step requires accountants to gather information from various documentation such as invoices, receipts, and contracts. Each transaction must be analyzed to understand its effect on the financial statements, considering aspects such as revenue, expenses, liabilities, and assets. Once identified and analyzed, these transactions will be recorded into the accounting system, leading to subsequent steps such as journalizing and posting.

This initial step is fundamental because accurate identification and analysis of transactions set the foundation for reliable financial reporting, ensuring that the company's financial records reflect its true state.