The first part of the Accounting Cycle is to collect accounting transactions and identify the events behind them.

There are many events that cause an accounting transaction. These include but are not limited to:

• Sales made to customers (sales made in cash and on credit are both accounting transactions, but they affect different accounts)
• Purchases of supplies (purchases made in cash or on credit are both accounting transactions, but they affect different accounts)
• Purchase of fixed assets
• Payment of an invoice from a customer
• Payment of an invoice to a supplier
• Investment in another business
• Borrowing funds from a lender
• Sale of assets to an external entity

If money changes hands, or there is the promise of money changing hands at a later date, an event has occurred.

The type of event has bearing on what accounts are affected, however, the first priority of the Accounting Cycle is simply to aggregate the accounting transactions that have taken place and identify the events behind them. Categorizing comes later.