The Accounting Cycle
explanatory Essay
977 words
The Accounting Cycle
The accounting cycle consists of the following ten steps:
1. Analyze and classify events.
2. Journalizing the event.
3. Posting to the ledger.
4. Taking an unadjusted trial balance.
5. Making adjusting entries.
6. Taking an adjusted trial balance.
7. Prepare financial statements.
8. Complete closing entries and post to the ledger.
9. Take an after closing trial balance.
10. If needed, do reversing entries and post to the ledger.
This paper will discuss these steps in detail. Because I work at home, I am not currently involved in any of the steps of the accounting cycle. The examples I give in this paper will be from various jobs I have held in the past.
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.
The second step is entering the transactions of the period in appropriate journals. This step consists of taking the journal entries, assigning each to an asset, liability, equity, expense or revenue account(s) to debit and credit. This can be done by almost anyone. I have had jobs where the bookkeeper does the journal entries and figures out which accounts are affected. I have also had jobs where anyone from a receptionist to a staff accountant does this step. If the person doing the journal entries does not have a background in accounting, or is unfamiliar with which accounts are affected, the person submitting the source documents will write down which accounts should be debited and which should be credited. This practice makes doing the journal entries little more than data entry, which can be done by nearly every employee.
The third step, posting to the ledger is usually done either by a bookkeeper or supervised by a bookkeeper. Before posting, the journal entries are reviewed by a bookkeeper for accuracy and then for each batch, the person who entered them is either given corrections to make or is told to post.
In this essay, the author
- Explains that the accounting cycle consists of the following ten steps: analyze and classify events, journaling the event, posting to the ledger, adjusting entries, preparing financial statements, closed entries and after closing trial balance.
- Explains that since they work at home, they are not currently involved in any of the steps of accounting cycle. the examples they give will be from various jobs i have held in the past.
- Explains that the first step is to analyze and classify events, and the recorder must decide what needs to be recorded.
- Explains that the accounting cycle consists of the following ten steps: analyze and classify events, journaling the event, posting to the ledger, adjusting entries, preparing financial statements, closed entries and after closing trial balance.
- Explains that since they work at home, they are not currently involved in any of the steps of accounting cycle. the examples they give will be from various jobs i have held in the past.
- Explains that the first step is to analyze and classify events, and the recorder must decide what needs to be recorded.
- Explains that the second step is entering the transactions of the period in appropriate journals. the bookkeeper does the journal entries and figures out which accounts are affected.
- Explains that posting to the ledger is done either by a bookkeeper or supervised by one. the journal entries are reviewed for accuracy and then for each batch, the person entering them is either given corrections to make or is told to post.
- Explains that an unadjusted trail balance is simply a list of accounts with the credit and debit balances with totals.
- Explains that adjusting entries are prepared and recorded by a bookkeeper or higher.
- Explains that the adjusted trial balance is the same as the unadjusted trail balance, except that all of the events for the period have been recorded.
- Explains that financial statements are prepared from the adjusted trial balance. they have been reviewed by an accountant or member of management and have never worked at a place that used worksheets.
- Explains that the next step is to close the temporary accounts. the bookkeeper usually does this step supervised by an accountant.
- Explains that reversing entries are optional, except in the case of accruals, when an expense is allocated between two periods.
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- Explains that the essay aims to analyse in depth a computerised accounting system and its aspects such as its history, what technologies is based on, and how it has developed since its beginning.
- Explains that every system interacts with other systems external to its boundary, such as marketing, human resources, customer relationship, supply, deliveries, or inventories.
- Explains that business uses computerised account systems because it is easier for accountants to access and provide financial information to other departments or managers as the information is easy accessible from the system.
- Explains that the essay aims to analyse in depth a computerised accounting system and its aspects such as its history, what technologies is based on, and how it has developed since its beginning.
- Explains that every system interacts with other systems external to its boundary, such as marketing, human resources, customer relationship, supply, deliveries, or inventories.
- Explains that business uses computerised account systems because it is easier for accountants to access and provide financial information to other departments or managers as the information is easy accessible from the system.
- Explains that accounting is a system that people have been using for thousands of years to keep and track their financial accounts and other financial information.
- Explains that all systems consist of three parts, its inputs, process and the output. an organisation may have a different system in each of their departments such as marketing, human resources, production purchasing, etc.
- Explains that computerised accounting systems are vulnerable to viruses, power failures, hacking, and theft. the accountant has to ensure that all data is correctly entered into the system.
- Explains that a computerised accounting system interacts with other systems, such as the marketing department and the human resources system. enterprise resource planning integrates internal and external information of different systems.
- Explains the benefits of cloud computing, such as the ability to access real-time data without having to install or have the hardware needed for it.
- Explains that bellis, m., and brooks, c. (2012). what is accounting?.
- Explains the advantages and disadvantages of computerized accounting. perry, b., 2005, organisational management and information systems.
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