Okay, so what are we done here we've gone through kind of the basic accounting cycle we talked about the basic financial statement starts with the balance sheet, all analytical processes. Start with understanding the balance as of today. Then the next step is once we have to balance sheets, we want to see what changed in between them. And that's the income statement income statement shows us changes over time. It's an activity based report that shows what happened over a period of time it's usually more detailed. The accounting cycle is a process of taking the activity business events that occur each day, turning those into journal entries which reflect the flow both in and out of each one of the kinds of assets or liabilities that exist.

And then taking those journal entries, posting those two balances so we keep track of what happened yesterday and show it today. Show it tomorrow throughout the entire county. Period. Then we say Okay, I'm done with the accounting period. I'm going to create my trial balance. I'm going to see how things stand as of today, what are the balances and make sure that I got everything recorded.

After creating the trial balance, I put the balances on the appropriate statements, balance sheet and income statement. And then I create closing entries, which zeroes out the income statement and makes a new balance in the balance sheet to reflect the opening of a new period. This then is the basic accounting cycle.