Hi,
In a simple AC cicruit diagram...the AC current is assumed to circulate back and forth...but when thinking about the household AC system...how is the AC circulation possible..does it have to complete the cycle between the house and the nearest transformer...how does this work ??

 

The simple answer is YES.

The current moves in a complete cycle, which is the reason there are two wires from the transformer to the house.

 

The potential between the two wires from the transformer rises to the positive and negative peak voltage once per cycle while going through zero volts in between the peaks. A 50Hz system does this 50 times per second. The current follows the voltage, as determined by the various loads connected in the house between the wires.