Which of the following is the first step in the accounting process?

In the accounting process, determining the category of a transaction is essential as it sets the foundation for all subsequent steps. Identifying the correct category helps in understanding the nature of the transaction, whether it pertains to assets, liabilities, equity, revenues, or expenses. This categorization is critical because it influences how the transaction will be recorded in accounts and how it will affect the financial statements.

Once the category is established, accountants can move on to analyzing how the transaction will impact the accounts within that category. This analysis includes determining if the transaction represents an increase or decrease and deciding if it is a debit or credit. However, without the initial categorization, the subsequent steps in the accounting process would lack context and clarity, making them less effective in accurately recording the financial activity.