Consulting Case Interview Practice Questions

Answer - A - The first step in the accounting cycle is to identify the transaction. This is done from a source document, such as an invoice or a receipt for sales, a canceled check for expenses, or a time card to produce a paycheck.

Key Takeaway: The accounting cycle is a series of steps taken from the beginning of a transaction through the accounting period as each transaction occurs. It begins with identifying the transaction through the source document to gain the information necessary to properly analyze the transaction. The information from the source document includes the date, the amount, a description, and the identity of any other involved party in the transaction so it can be analyzed and posted to the journal properly.