Explain the accounting cycle with a diagram.

1. 1 · Define the cycle. The sequence of steps from recording transactions to closing the books, repeated every period.
2. 2 · Draw the cycle. [Diagram: nine steps in a circle, arrows clockwise, 'one accounting period' in the centre]
3. 3 · Explain the steps during the period.
   • Analyse source documents.
   • Journalise.
   • Post to the ledger.
4. 4 · Explain the steps at period end.
   • Unadjusted trial balance.
   • Adjusting entries and the adjusted trial balance.
   • Financial statements.
   • Closing entries and the post-closing trial balance.
5. 5 · Separate temporary and permanent accounts. Income, expenses and drawings close; assets, liabilities and capital carry forward.
6. 6 · Sri Lankan link. Many Sri Lankan companies close at 31 March, the end of the tax year.
7. 7 · Conclude. The cycle ensures every transaction is recorded once, in the right period, and reported.

Scoring tip: Number the steps inside the circle; a clear diagram can carry half the marks.