BASIC ACCOUNTING CYCLE STEPS The main aims of the accounting function in any organization are to process financial information and to prepare financial statements at the end of the accounting specified period. To achieve these aims series of steps is required which is commonly known as” the Accounting Cycle”. The accounting cycle is a series of procedures in the collection, processing, and communication of financial information to a various interested parties or users. Accounting involves recording, classifying, summarizing, and interpreting financial information. Financial information is presented in reports called financial statements. Accountants need to collect information about business transactions and record them in order to be able …show more content…
Data is captured about the event that occurred, the resources affected by the event and the agents who participated. The main point in this step is that not all business transactions and events are entered into the accounting system. The only transactions that must be entered into the accounting system those that are related to the business entity. For Instance, a personal loan made by the owner that does not have anything to do with the business entity is not accounted for. The transactions identified are then analyzed to identify the accounts affected and the amounts to be recorded. This step includes the preparation of business documents, or what is called “source documents”. The source documents are the origin of the information that is recorded in to the accounting books and it serves as basis for recording a business transaction. 2. Recording in the Journals/ Journalizing Recording transactions in journals is the second step of accounting process. Journal is a book, either a paper or electronic – in which transactions are recorded. Journals are also known as “Books of Original Entry”. Business transactions are recorded using the double-entry bookkeeping system. They are recorded in journal entries containing at least two accounts (one debited and one …show more content…
A trial balance is prepared to check the equality of the debits and credits as recorded in the general ledger. All account balances are taken from the ledger and organized in one report. Then, all debit and credit balances are added and the total of all debits and all credits must be equal. In case of detecting some errors, correcting entries are made to correct them or invert their effect before proceeding to the next step. 5. Prepare Adjusting Entries At the end of accounting period, adjusting entries are needed to bring accounts to their correct balances after taking in account transactions that not yet recorded. For instance, some expenses may have been incurred but not yet recorded in the journals, or some income may have been earned but not recorded in the journal. Adjusting entries are prepared to update the accounts before they are summarized in the financial statements. 6. Prepare Adjusted Trial Balance In this step, adjusted trial balance is prepared after adjusting entries are made and before preparing the financial statements in order to test the equality of debits and credits as with an unadjusted trial balance step. 7. Prepare Financial
Accounts receivable ending balance= Beginning balance +sales on Account - cash receipts -sales returns and allowances- charge of uncollectible account
Reimers, Jane L. (2003). Financial Accounting A Business Process Application. Upper Saddle River, New Jersey, Prentice Hall.
Management accounting in organisation is very important for decision-making and to make the business more efficient and therefore increasing its profits. Is the process of preparing accounts that can help managers to make day-to-day and short-term decisions, by providing them with accurate and timely key financial and statistical information...
The records shall contain all assets, income, expenses liabilities, and all business transactions. Our company is committed to an independent, robust internal and external audit process. • Conclusion The company seeks to be a perfect company.
• Assembled financial reports by collecting, analyzing, and summarizing account information and
...ncreasing the capital So ( Falsely ) the books looked very good the business is ending up making money and again the trial balance and the account equation are correct
5 Recognition and Measurement in Financial Statements of Business Enterprises, revenue should not be recognized until they are realized or realizable (FASB, 1984). In other words, when revenues are recognized if they are realizable is when the stated assets have need received or they are readily held convertible to known figures. It is also stated that revenue can be recognized when it is earned. Accounting Standards Codification 606-10-25-1 states that an entity shall account for a contract with a customer that is within the scope of: the parties to the contract approving the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations, the entity can identify each party’s rights regarding the goods or services to be transferred, the entity can identify the payment terms for the goods or services to be transferred, the contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract), and it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer (FASB,
The fist step is to analyze and classify events. In order to enter the transactions, the recorder must first decide what needs to be recorded. An event should be recorded "if it is measurable, and is relevant and reliable" (Kieso, Weygant, & Warfield, 2004). Although there are some events that increase the assets of the business, they are not all able to be recorded. For example, hiring a highly skilled employee can be seen as acquiring an asset, but there no way to measure the asset, so it is not recorded. In my experience, management usually makes these decisions. The source documents are complied and given to the accounting department.
Transactional Processing The accounting software packages developed and distributed by Sage and Microsoft, respectively, each use their own methods for recording accounting information. Sage 50. There are three different areas that must be discussed. These are the revenue, expenditure, and financing cycles. These areas are written about from the author's own knowledge from using the software, as learned from the book by Carol Yacht (2013).
Financial and Managerial accounting are used for making sound financial decisions about an organization. They provide information of past quantitative financial activities and are useful in making future economic decisions. (Albrecht, Stice, Stice, & Skousen, 2002) The same financial data is used to derive reports for each accounting process yet they differ in some ways. Financial accounting primarily provides external reports for external users such as stock holders, creditors, regulating authority and others. (Garrison, Noreen, & Brewer, 2010) On the other hand Managerial accounting is concern with providing information that deals with the internal viability of the organization and is tailored to meet the needs of an individual organization. (Albrecht, Stice, Stice, & Skousen, 2002)
Accounting is the pillar of every company to measure its growth, loss, revenue , capital, its really specify the real terms in foam of figures and sometimes in tables, in accounting there are certain rules are obtained to make more accuracy while playing with figures.
Preparing general-purpose financial statements; including the balance sheet, income statement, statement of retained earnings, and statement of cash flows; is the most important step in the accounting cycle because it represents the purpose of financial accounting.
Accounting aids the government and organisations in decision making for their financial stability. This numerical data helps solve real life problems and contributes to how the economy and businesses perform.
This shows the total balance of credits and debits are equality after the temporary accounts had being zero and didn’t list on the post-closing trial balance. This is the end of accounting cycle and it will start again with the first step in the next accounting
Accounting itself is a system that people has been using for thousands of years, the system records financial information about a person or business, businesses use it in order to be able to keep and track their financial accounts and other financial information in a safe and efficient way. (Brooks, 2012)