What is the main purpose of an accounting cycle?

The primary purpose of an accounting cycle is to systematically gather, process, and report financial information in order to prepare accurate financial statements. This cycle encompasses a series of steps, including recording transactions, posting them to the ledger, and adjusting accounts, all leading to the final preparation of financial statements such as the balance sheet, income statement, and cash flow statement. These statements provide essential insights into a company's financial health and performance, enabling stakeholders to make informed decisions.

While managing accounts payable, analyzing stock values, and setting up budgets are important activities within the broader scope of financial management, they are not the primary focus of the accounting cycle itself. Rather, these functions can be seen as outputs or applications of the information derived from the financial statements that result from a completed accounting cycle.