Accounting cycle
The accounting cycle is the repeating sequence of steps — journalise, post, trial balance, adjust, prepare statements, close — that turns a period's transactions into a fresh set of accounts.
See it move
A sole trader opens July with €10,000 of capital, held as cash. Cash sales of €4,000, cash purchases of €2,600 and rent of €500 are journalised, posted and trial-balanced, giving profit of €4,000 − €2,600 − €500 = €900. Closing transfers that profit into capital, raising it from €10,000 to €10,900, matching the cash now held.
Check yourself
A sole trader opens the month with capital of €18,000, held entirely as cash. During the month she makes cash sales of €5,200, pays cash purchases of €3,100, and pays rent of €700. No other transactions occur. After the accounting cycle's closing step, what is the trader's capital account balance?