What is the first step in the accounting cycle?

The first step in the accounting cycle is recording transactions. This fundamental process involves documenting all business transactions in a systematic manner, typically within a journal. Accurate and timely recording is crucial, as it establishes the baseline data that will be used for further steps in the accounting cycle. Each transaction is entered with details such as the date, accounts affected, amounts, and a brief description. This step ensures that there is a complete and verifiable record of financial activity, which serves as a foundation for the subsequent actions in the cycle, including adjusting entries, preparing financial statements, and closing the accounts. Without this initial step, the integrity and accuracy of the entire accounting process would be compromised.