In the accounting cycle, what is the first step?

• A. Journalize transactions
• B. Prepare a trial balance
• C. Prepare post-closing trial balance
• D. Collect and analyze source documents

Answer: (D)

Collecting and analyzing source documents comes first because these documents provide the evidence and details you need to identify every financial event. Invoices, receipts, purchase orders, and payroll records show who is involved, what happened, when it occurred, and for how much, giving you an accurate basis for recording. Only after understanding and verifying these transactions should you journalize them, so the recording reflects reality. The later steps—posting to the ledger, preparing trial balances, adjusting entries, and closing—rely on that initial, verified data.