Which of the following correctly represents the sequence of steps in the accounting cycle, as followed in both manual and computerised accounting systems?

The accounting cycle is a systematic process that follows a specific sequence from transaction occurrence to financial statement preparation. This sequence remains the same whether using manual or computerised accounting systems.

The correct sequence begins with analyzing transactions to determine their accounting impact. Once analyzed, transactions are recorded in the journal (journalizing) with proper debit and credit entries. These journal entries are then posted to respective ledger accounts.

After posting, a trial balance is prepared to verify that total debits equal total credits. However, the trial balance may not reflect certain items like accrued expenses, prepaid expenses, depreciation, etc. Therefore, adjusting entries are made to ensure accounts reflect true financial position.

An adjusted trial balance is then prepared incorporating all adjustments. Finally, financial statements (Trading and Profit & Loss Account, Balance Sheet) are prepared using the adjusted trial balance figures.

Looking at the options:

Option 1 starts with posting, which cannot happen before analyzing and recording transactions.

Option 3 incorrectly places balance sheet preparation at the beginning rather than at the end.

Option 4 shows posting adjustments before trial balance and journalizing, which violates the logical flow.

Option 2 correctly presents the complete sequence: Analyzing transactions → Journalizing → Posting to ledger → Preparing trial balance → Adjustments → Adjusted trial balance → Financial statements.

This logical flow ensures that each step builds upon the previous one, maintaining the integrity of accounting records.