Which of the following presents the first three steps in the accounting cycle in the correct order?

• A. Prepare financial statements, analyze transactions, journalize transactions
• B. Post to ledger accounts, analyze transactions, journalize transactions
• C. Journalize transactions, prepare trial balance, post to ledger accounts
• D. Analyze transactions, journalize transactions, post to ledger accounts

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the accounting cycle, which is the process of recording and processing all financial transactions of a company. It typically begins with analyzing transactions and ends with preparing financial statements.
2. Step 2: Analyze transactions by reviewing source documents (e.g., invoices, receipts, contracts) to determine the nature of the transaction and its impact on the accounting equation (Assets = Liabilities + Equity).
3. Step 3: Journalize transactions by recording them in the journal using the double-entry accounting system. Each transaction is recorded as a debit and a credit in the appropriate accounts.
4. Step 4: Post the journalized transactions to the ledger accounts. This involves transferring the debit and credit amounts from the journal to the respective accounts in the general ledger.
5. Step 5: Recognize that these steps (Analyze transactions, Journalize transactions, Post to ledger accounts) are the first three steps in the accounting cycle and are foundational for accurate financial reporting.