{"id":7388,"date":"2026-04-04T18:55:12","date_gmt":"2026-04-04T18:55:12","guid":{"rendered":"https:\/\/alhamli.com.sa\/?p=7388"},"modified":"2026-04-04T19:25:17","modified_gmt":"2026-04-04T19:25:17","slug":"accounting-cycle","status":"publish","type":"post","link":"https:\/\/alhamli.com.sa\/en\/blog\/accounting-cycle\/","title":{"rendered":"A Clear Guide to Understanding the Accounting Cycle from Journal Entries to Closing and Reporting"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The <\/span><span style=\"font-weight: 400;\">accounting cycle<\/span><span style=\"font-weight: 400;\"> is the backbone of any effective accounting system. It is a structured sequence of steps through which a company\u2019s financial transactions are recorded, classified, and summarized over a specific accounting period. In Saudi Arabia, adherence to this cycle ensures the accuracy of financial data in accordance with the <\/span><span style=\"font-weight: 400;\">International Financial Reporting Standards<\/span><span style=\"font-weight: 400;\"> (IFRS) approved by the (Saudi Organization for Chartered and Professional Accountants (SOCPA)). This is emphasized by specialized firms such as <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/\"><span style=\"font-weight: 400;\">Al-Hamli &amp; Partners<\/span><\/a><span style=\"font-weight: 400;\">, where this framework supports the preparation of financial reports that reflect a company\u2019s financial position and operational performance. This article aims to provide a clear and simplified guide to the <\/span><span style=\"font-weight: 400;\">accounting cycle<\/span><span style=\"font-weight: 400;\">, starting from recording daily entries to closing accounts and issuing final reports, while considering the Saudi accounting environment.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">What is the Definition of the <\/span><span style=\"font-weight: 400;\">Accounting Cycle<\/span><span style=\"font-weight: 400;\">?<\/span><\/h2>\n<figure id=\"attachment_7390\" aria-describedby=\"caption-attachment-7390\" style=\"width: 1920px\" class=\"wp-caption aligncenter\"><img fetchpriority=\"high\" decoding=\"async\" class=\"wp-image-7390 size-full\" src=\"https:\/\/alhamli.com.sa\/wp-content\/uploads\/2026\/04\/process-consisting.jpg\" alt=\"process consisting\" width=\"1920\" height=\"1080\" srcset=\"https:\/\/alhamli.com.sa\/wp-content\/uploads\/2026\/04\/process-consisting.jpg 1920w, https:\/\/alhamli.com.sa\/wp-content\/uploads\/2026\/04\/process-consisting-300x169.jpg 300w, https:\/\/alhamli.com.sa\/wp-content\/uploads\/2026\/04\/process-consisting-1024x576.jpg 1024w, https:\/\/alhamli.com.sa\/wp-content\/uploads\/2026\/04\/process-consisting-768x432.jpg 768w, https:\/\/alhamli.com.sa\/wp-content\/uploads\/2026\/04\/process-consisting-1536x864.jpg 1536w\" sizes=\"(max-width: 1920px) 100vw, 1920px\" \/><figcaption id=\"caption-attachment-7390\" class=\"wp-caption-text\">process consisting<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">The <\/span><span style=\"font-weight: 400;\">accounting cycle<\/span><span style=\"font-weight: 400;\"> is a systematic process consisting of eight main steps, beginning with identifying financial transactions and ending with <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/blog\/preparing-financial-statements\/\"><span style=\"font-weight: 400;\">preparating financial statements<\/span><\/a><span style=\"font-weight: 400;\"> and closing accounts. This cycle is repeated in every accounting period (monthly, quarterly, annually) to ensure continuity and accuracy of financial information, forming the basis for compliance with regulatory requirements in Saudi Arabia.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Key Steps of the <\/span><span style=\"font-weight: 400;\">Accounting Cycle<\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Identifying and Analyzing Financial Transactions<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The first step is identifying financial transactions that occurred during the accounting period. These include any events affecting the company\u2019s financial position, such as sales, purchases, payroll payments, revenue collection, or expense payments. Each transaction must be analyzed to determine the affected accounts (e.g., cash, inventory, sales, expenses) and whether they are debit or credit, while considering their impact on zakat or tax obligations.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Recording Transactions in the Journal (Journal Entries)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">After analysis, transactions are recorded chronologically in the journal as journal entries, following the double-entry principle, where each transaction has equal debit and credit sides. Each entry includes the date, debit and credit accounts, amount, and a brief description. Accuracy and proper documentation are essential to support financial and tax reporting.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Posting to the General Ledger<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">After recording journal entries, amounts are posted to the respective accounts in the general ledger. The general ledger consolidates all transactions related to each account (e.g., cash, suppliers, sales), enabling tracking of individual account balances. This step is essential for preparing the trial balance and financial statements.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Preparing the (Unadjusted Trial Balance)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">At the end of the accounting period, the unadjusted trial balance is prepared, listing all debit and credit balances from the general ledger. Its purpose is to ensure that total debits equal total credits, indicating initial accounting accuracy before adjustments.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Adjusting Entries (Adjusting Journal Entries)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Adjustments are made at the end of the period to ensure compliance with the accrual basis and matching principle, according to <\/span><span style=\"font-weight: 400;\">International Accounting Standards<\/span><span style=\"font-weight: 400;\"> adopted in Saudi Arabia. Common adjustments include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">(Accrued expenses): expenses incurred but not yet paid (e.g., unpaid salaries).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">(Accrued revenues): revenues earned but not yet received (e.g., services provided but not invoiced).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">(Prepaid expenses): expenses paid in advance (e.g., prepaid rent).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">(Unearned revenues): revenues received before being earned.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">(Depreciation and amortization): allocation of asset costs over useful life.<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Preparing the Adjusted Trial Balance<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">After posting adjustments, a new trial balance called the adjusted trial balance is prepared. It reflects final account balances and serves as the basis for preparing financial statements in accordance with <\/span><span style=\"font-weight: 400;\">International Financial Reporting Standards <\/span><span style=\"font-weight: 400;\">(IFRS).<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Preparing the (Financial Statements)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Using the adjusted trial balance, the main <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/blog\/preparing-financial-statements\/\"><span style=\"font-weight: 400;\">preparating financial statements<\/span><\/a><span style=\"font-weight: 400;\"> that required by <\/span><span style=\"font-weight: 400;\">international accounting standards<\/span><span style=\"font-weight: 400;\"> in Saudi Arabia:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Statement of Comprehensive Income: determines net profit or loss.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Statement of Changes in Equity: shows changes in owners\u2019 equity.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Statement of Financial Position: presents assets, liabilities, and equity.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Statement of Cash Flows: shows cash movements operating, investing, financing.<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Closing Accounts and Preparing the (Post-Closing Trial Balance)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">At the end of the accounting period, temporary nominal accounts such as revenues and expenses are closed. Their balances are transferred to the income summary, then to retained earnings within equity. This process resets these accounts to zero for the next period. After closing, the post-closing trial balance is prepared to ensure that permanent accounts assets, liabilities, equity remain balanced, ensuring accurate records for the next cycle. For more information about our services, feel free to contact us at <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/contact-us\/\"><span style=\"font-weight: 400;\">0539300404<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Also Read:<\/span><\/h3>\n<ul>\n<li><span style=\"font-weight: 400;\">Best <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/blog\/chartered-accountants-and-auditors\/\"><span style=\"font-weight: 400;\">Certified Accountants and Auditors<\/span><\/a><span style=\"font-weight: 400;\"> Firms in Saudi Arabia 2026<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Required Steps When Establishing a <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/blog\/company-formation-in-saudi-arabia\/\"><span style=\"font-weight: 400;\">Company formation in Saudi Arabia<\/span><\/a><span style=\"font-weight: 400;\"> with a Certified Accounting Firm<\/span><\/li>\n<li><a href=\"https:\/\/alhamli.com.sa\/en\/blog\/financial-statements-for-companies\/\"><span style=\"font-weight: 400;\">Financial Statements for Companies<\/span><\/a><span style=\"font-weight: 400;\"> as a Mirror of Corporate Performance<\/span><\/li>\n<li><span style=\"font-weight: 400;\">How to Choose a Professional Team of Certified <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/blog\/accountants-2\/\"><span style=\"font-weight: 400;\">Accountants<\/span><\/a><span style=\"font-weight: 400;\"> for Your Company in Saudi Arabia<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Is Your Company Ready for Investment? The Answer Lies in the <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/blog\/balance-sheet-2\/\"><span style=\"font-weight: 400;\">Balance Sheet<\/span><\/a><\/li>\n<li><a href=\"https:\/\/alhamli.com.sa\/en\/blog\/internal-auditing\/\"><span style=\"font-weight: 400;\">Internal Auditing<\/span><\/a><span style=\"font-weight: 400;\"> as the First Line of Defense Against Losses and Risks<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">Importance of the <\/span><span style=\"font-weight: 400;\">Accounting Cycle<\/span><span style=\"font-weight: 400;\"> for Your Business<\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Accuracy and reliability: Ensures proper recording of all transactions for financial and tax reporting.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Compliance: Supports adherence to <\/span><span style=\"font-weight: 400;\">International Accounting Standards<\/span><span style=\"font-weight: 400;\"> and regulations issued by <\/span><a href=\"https:\/\/zatca.gov.sa\/en\/Pages\/default.aspx\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Zakat, Tax and Customs Authority<\/span><\/a><span style=\"font-weight: 400;\"> (ZATCA).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Decision-making: Provides reliable financial information for management and investors.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Transparency: Enhances trust among stakeholders.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Comparability: Enables comparison across periods and with other companies in the Saudi market. For more information about our services, feel free to contact us at <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/contact-us\/\"><span style=\"font-weight: 400;\">0539300404<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">Conclusion:<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The <\/span><span style=\"font-weight: 400;\">accounting<\/span> <span style=\"font-weight: 400;\">cycle<\/span><span style=\"font-weight: 400;\"> is a vital process that ensures order and accuracy in recording and summarizing financial information. By following its steps in accordance with <\/span><span style=\"font-weight: 400;\">International Accounting Standards<\/span><span style=\"font-weight: 400;\"> approved by (SOCPA), from identifying transactions to closing accounts and issuing reports, businesses can obtain a clear and comprehensive view of their financial position and performance. Understanding and properly applying this cycle is not just an accounting requirement, but a foundation for sound financial management, regulatory compliance, and sustainable business success in Saudi Arabia\u2019s dynamic economic environment.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Common Questions:<\/span><\/h2>\n<h3><span style=\"font-weight: 400;\">How does the <\/span><span style=\"font-weight: 400;\">Accounting Authority<\/span><span style=\"font-weight: 400;\"> help companies comply with <\/span><span style=\"font-weight: 400;\">International Accounting Standards<\/span><span style=\"font-weight: 400;\">?<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The <\/span><span style=\"font-weight: 400;\">Accounting Authority<\/span><span style=\"font-weight: 400;\"> supports companies by issuing regulations and professional guidelines, ensuring compliance with <\/span><span style=\"font-weight: 400;\">International Accounting Standards<\/span><span style=\"font-weight: 400;\">, and providing oversight and continuous training to enhance reporting quality.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">What is the role of the <\/span><span style=\"font-weight: 400;\">IFRS Foundation<\/span><span style=\"font-weight: 400;\"> in developing <\/span><span style=\"font-weight: 400;\">International Accounting Standards<\/span><span style=\"font-weight: 400;\">?<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The<\/span><span style=\"font-weight: 400;\"> IFRS Foundation<\/span><span style=\"font-weight: 400;\"> develops and updates <\/span><span style=\"font-weight: 400;\">International Accounting Standards<\/span><span style=\"font-weight: 400;\"> to unify accounting practices globally, enhancing transparency and reliability of financial data.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">How does <\/span><span style=\"font-weight: 400;\">Al-Hamli &amp; Partners<\/span><span style=\"font-weight: 400;\"> help companies apply <\/span><span style=\"font-weight: 400;\">International Financial Reporting Standards<\/span><span style=\"font-weight: 400;\"> (IFRS)?<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Al-Hamli &amp; Partners<\/span><span style=\"font-weight: 400;\"> assists companies in implementing <\/span><span style=\"font-weight: 400;\">International Financial Reporting Standards<\/span><span style=\"font-weight: 400;\"> (IFRS) by organizing accounting systems, preparing accurate financial statements, and providing consultancy to ensure full compliance. For more information about our services, feel free to contact us at <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/contact-us\/\"><span style=\"font-weight: 400;\">0539300404<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">How is <\/span><span style=\"font-weight: 400;\">Auditing according to International Standards<\/span><span style=\"font-weight: 400;\"> conducted within companies?<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Auditing according to International Standards<\/span><span style=\"font-weight: 400;\"> is performed by examining financial records and data to ensure accuracy and compliance, helping detect errors and enhance the credibility of financial reports. For more information about our services, feel free to contact us at <\/span><a href=\"https:\/\/alhamli.com.sa\/en\/contact-us\/\"><span style=\"font-weight: 400;\">0539300404<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The accounting cycle is the backbone of any effective accounting system. It is a structured sequence of steps through which [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":7383,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"_joinchat":[],"footnotes":""},"categories":[27],"tags":[],"class_list":["post-7388","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/posts\/7388","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/comments?post=7388"}],"version-history":[{"count":4,"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/posts\/7388\/revisions"}],"predecessor-version":[{"id":7412,"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/posts\/7388\/revisions\/7412"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/media\/7383"}],"wp:attachment":[{"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/media?parent=7388"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/categories?post=7388"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/alhamli.com.sa\/en\/wp-json\/wp\/v2\/tags?post=7388"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}