Accounting Cycle Question

by Anonymous

Q: Which steps in the accounting cycle require the most thought and judgement by the accountant:
(a) preparing a trial balance,
(b) posting adjusting, and closing entries, or
(c) analyzing and recording transactions?
Explain your answer.

A: In my opinion, I'd say (b) or (c) but definitely not (a).

The reason for definitely not (a) preparing a trial balance is that almost all businesses these days have computerized accounting systems. Which means that once the journals are entered (which is (c) above), the T-accounts, trial balance and financial reports are automatically generated by the accounting package with zero errors (unless you made an error when initially recording a transaction).

Both (b) posting adjusting, and closing entries and (c) analyzing and recording transactions require quite a bit of thought and judgement by the accountant. However, if you are a good accountant or have a good accountant then both these functions should be fairly easy.