Attached are the steps of the accounting cycle. Accounting cycle is a process of recording all the financial transactions and processing them. To be a well-rounded SAP-FI functional consultant, understanding the cycle gives an edge. Understanding the cycle helps you know what the end users do and at what stage. In a scenario where the trial balance needs to be adjusted so that debits and credits match, you would be able to trace the reasons easily by first calling for the journal, comparing the entries and what was posted to GL etc. However, the common reason for imbalance trial balance includes; Forgetting a transaction, posting a transaction to the wrong account, posting a transaction as a debit instead of a credit, or vice versa, Duplicate postings, Posting the wrong amount. Understanding the processes can be essential for SAP FI Consultant.
1. Identifying transactions – financial transactions occur, such as selling inventory, buying raw materials, or making lease payments, for example.
2. Record transactions in a journal – Those transactions are noted in the appropriate financial journal, depending on what the money was spent on or originated from. Debits are used to indicate money spent and credits are used for money that is received.
3. Posting – The transactions are then posted to the account in the general ledger, which is the list of all the business’ financial accounts, that it impacts, such as rent or wages or marketing.
4. Unadjusted Trial Balance – At the end of the accounting period, you run a trial balance to see if all the numbers balance. Frequently, they won’t, so adjustments are necessary.
5. Adjusted Trial Balance – The next step is trying to find the cause of the imbalance and correcting it.
6. Financial Statement – Once the accounts are balance, financial statements are prepared.
7. Closing the book – At the end of the period, the books are closed out and new revenue and expense accounts created with zero balances. These are used for the next accounting period.
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