Business Requirements
Thursday, 1 March 2018
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These steps are called accounting cycles. So the accounting cycle is the cycle that indicates the steps required for the completion of the accounting process manually.
The accounting cycle can be explained in accordance with the sequence of events as follows:
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1. Transactions that occur in the company will be recorded in the source document.
Examples of source documents or proof of transactions include receipts of payment or cash receipts, purchase invoices, sales invoices, business cards, and others.
2. Transactions occurring within a period are recorded according to the sequence of events in a book.
The recording is commonly referred to as making a journal. Thus keeping track of is equivalent to journalizing Book transactions used to record transactions or making these journals called diaries. Called a diary because the records in this book should be done in order of occurrence (chronology) which is generally done every day.
Thus the journal in the diary is a permanent record of all business transactions of the company. This journal is conducted on the basis of a source document called proof of transaction according to the credit debt rules as discussed in previous articles.
3. The next step after creating a journal is to move notes in the diary to groups of accounts called ledgers.
The process of moving and grouping notes from this diary into a ledger is called by
post process. At the end of the period - after all, transactions are recorded in the journal (journal) and posted to the account entirely in the ledger - the balance for each account is calculated. Balance is the difference between the debit side and the credit side for each account type.
4. The final step is to prepare a list of all accounts and balances.
This list is called the trial balance. The trial balance is prepared to see the similarity of debit and credit accounts in the ledger. The summary of accounts along with their balances listed in the trial balance is used as the basis for preparing financial statements.
Read Also: Accounting Information
Read Also: Accounting Information
Any business transactions that occur in a company, affecting at least two accounts. Regardless of the number of accounts involved in a transaction, the number of debits and credits will always be the same for every transaction. This fulfills the basic equation of accounting principles in which Assets = Liabilities + Equity.
Due to this dual equation and the effect of transactions on at least two accounts, such accounting systems are called double-accounting systems.
The paired accounting system is a tool that can be used to analyze transactions. Steps in analyzing business transactions can be done in the following order:
The paired accounting system is a tool that can be used to analyze transactions. Steps in analyzing business transactions can be done in the following order:
- Determine the effect of a transaction on an asset account, liabilities, owner's equity, (including both income and expense accounts).
- Determine the effect of the transaction on each account, whether the account has increased or decreased.
- Determine whether the increase or decrease in the account should be recorded next to the credit or debit side. To analyze the effect of a transaction on assets, liabilities and owner's equity accounts, keep in mind the basic equation of accounting and debiting and crediting rules as in the previous article.
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