Question

Which of the following is not an actual step in the accounting cycle?

1) Financial statements are prepared.
2) Closing entries are journalized and posted to the ledger.
3) Decisions are made after reviewing the financial statements.
4) Transactions are analyzed and recorded in the journal.

Answer 1

Option 3, 'Decisions are made after reviewing the financial statements,' is not an actual step in the accounting cycle; while important, decision-making falls outside the formal procedures of recording and reporting financial data.

Step-by-step explanation:

The question pertains to identifying which of the provided options is not an actual step in the accounting cycle. The steps listed are typical of the accounting process with the exception of number 3) Decisions are made after reviewing the financial statements. While reviewing financial statements is a natural step after they have been prepared, making decisions is not considered a formal part of the accounting cycle. The accounting cycle's primary focus is on recording and processing financial transactions to produce financial statements.

1. Financial statements are prepared.
2. Closing entries are journalized and posted to the ledger.
3. Decisions are made after reviewing the financial statements.
4. Transactions are analyzed and recorded in the journal.

Option 3 does not correspond with the formal steps of the accounting cycle, which are designed to maintain accuracy and consistency in financial reporting and typically end with the preparation of financial statements and closing entries.