To answer this question, we need to understand the accounting cycle and the process of manual accounting first. When you are doing accounting for a business manually, you need to go through the entire accounting cycle in a step-by-step process to prepare the business financial statements.
What is accounting cycle?
Accounting cycle is a series of account-related processes which shows how accounting transactions of a business is recorded in its book.
The diagram below shows the process of an accounting cycle in a step-by-step process.