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In the accounting cycle, what happens immediately after transactions are recorded in a journal?
AA trial balance is prepared from them
BThe financial statements are prepared
CThe reports are analyzed by managers
DThe entries are recorded in ledgers
Answer & Solution
Correct answer: D. The entries are recorded in ledgers
1. The cycle begins by analyzing the data collected from many sources and reviewing the documents for completeness.
2. Each transaction is then recorded in a journal, a listing of financial transactions in chronological order.
3. Those journal entries are next recorded in ledgers, which show increases and decreases in specific asset, liability and owners' equity accounts.
4. Only after that are the ledger totals summarized in a trial balance, so the trial balance cannot come straight after the journal.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 14 "Using Financial Information and Accounting", section 14.3 Basic Accounting Procedures_
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