what is the accounting cycle 
financial accountants typically operate in a cyclical environment with the same steps happening in order and repeating every reporting period these steps are often referred to as the accounting cycle the process of taking raw transaction information entering it into an accounting system and running relevant and accurate financial reports the steps of the accounting cycle are cash method vs accrual method of accountingfinancial accounts have two different sets of rules they can choose to follow the first the accrual basis method of accounting has been discussed above these rules are outlined by gaap and ifrs are required by public companies and are mainly used by larger companies the second set of rules follows the cash basis method of accounting instead of recording a transaction when it occurs the cash method stipulates a transaction should be recorded only when cash has been exchanged because of the simplified manner of accounting the cash method is often used by small businesses or entities that are not required to use the accrual method of accounting imagine a company buys 1 000 of inventory on credit payment is due for the inventory in 30 days the difference between these two accounting methods is the treatment of accruals naturally under the accrual method of accounting accruals are required under the cash method accruals are not required and not recorded the securities and exchange commission has an entire financial reporting manual outlining the reporting requirements of public companies 13