What is the first step in the accounting cycle?

• A. Transactions are analyzed and recorded in the journal.
• B. An unadjusted trial balance is prepared.
• C. Posting to the ledger.
• D. Financial statements are prepared.

Answer: (A)

Starting the accounting process with analyzing and recording transactions in the journal sets the foundation for everything that follows. When a business event occurs, you determine which accounts are affected and how, then record the entry in the journal with the correct debit and credit amounts. This creates a chronological, auditable trail of all transactions and provides the source data for every later step. After journalizing, the amounts are posted to the general ledger, which organizes balances by account. Only after posting can you generate an unadjusted trial balance to verify that debits equal credits, and only then are financial statements prepared (after adjustments). So the journal entry step is essential because it kickstarts the entire accounting data flow and ensures the information is captured accurately from the outset.