What is typically the first step in the accounting cycle?

The first step in the accounting cycle is recording transactions in journals. This foundational activity involves capturing all financial transactions that occur within a business, which is essential as it forms the basis for all subsequent accounting processes.

When transactions occur, they are documented in chronological order within journals through entries. Each entry includes critical details such as date, accounts involved, amounts, and descriptions. This systematic approach ensures accurate record-keeping, which is vital for maintaining comprehensive financial statements and providing a clear financial picture of the organization.

Following this initial step, the accounting cycle continues with further actions such as posting these journal entries to ledgers, preparing trial balances, and ultimately generating financial statements. However, without the proper recording of transactions, the reliability of all those subsequent steps would be compromised, making this initial phase indispensable in accounting practices.