Friday, 13 July 2018

Accounting cycle

A accounting cycle is defined as follows: the accounting Cycle is the main principle of accounting procedures that are used to process transactions during a given period.

As a method, accounting also has stages – stages that must be traveled to get the desired results. In general the financial statements that will be found at the end of the accounting process is the result of all the record-keeping process is done, from the recording of the transaction up to the preparation of the financial statements that occur continuously and repeatedly – reset. This process is called with the accounting cycle.

Accounting cycle

While understanding the accounting cycle are as follows: 

Accounting Cycles are stages activities ranging from the occurrence of the transaction up to the preparation of the financial statements so that it is ready for the recording of the transaction period the next happened in repeatedly and continuous.

The accounting Cycle consists of the following activities:

Document proof of the transaction

The first step in the accounting cycle is the analysis of evidence and certain other events. The transaction is any occurrence that changes the financial position and business results of the company or institution. The transaction as a sale, purchase, transactions regarding costs and its relationship with the bank note in proof of formerly collected systematically as a basis for the next recording.

Record the transaction in a journal (diary)

After document evidence of a transaction, the next step is to record the transaction in a diary or journal. Book – the diary at a minimum consists of a cash book, book sales, and book purchases. The book is a journal of media to record transactions in chronological order (in order of time). Movers post to the big book - After the journal made the journals – Journal of then in a post into a great book. A great book is a collection of the guesses are interconnected and that constitute a unity unto itself.

Compiling a balance sheet balances

After all the journal posted to a ledger, then the next from the ledger made the balance sheet balances. This is to check the correctness of the recording in the journal and ledger debit amount does by looking as great as the amount of the credit.

Create a balance sheet columns

Balance sheet the balance sheet column consists of columns of balance before adjustment, verse journal, balance sheet adjustment after adjustment balance, profit and loss balance sheet. Basically the balance sheet columns serve to facilitate the preparation of financial statements and to avoid the occurrence of errors.

Compose verse journal adjustment

Financial reports often cannot be compiled directly from the balance sheet balance, because the data is stated in the balance sheet balance still requires adjustment by way of making the adjustment journal. Verse Journal of useful adjustments to correct certain accounts so that it reflects the State of the assets, liabilities, revenue, expense and capital. 

Accounts certain accounts incurred due to transactions such as payment in advance, the calculation of the physical inventory, change in wisdom, non-routine adjustments. Each journal adjustments will affect at least one balance sheet accounts and one account income in the same amount.

Drafting financial statements

The financial report is a summary of a process, a summary of the financial transactions that occurred during the know books are concerned. The objective of financial statements is to provide information concerning the financial position, performance and changes in financial position, an enterprise that is useful to a large number of users in making economic decisions. Besides the financial statements can also be used to meet other objectives, namely as a report to parties outside of the company.

Compose journal covering and reflexive journals

For small accounting firms, accounting is usually equated with individual companies because its application system alike are not too complicated. Journal cover is made to move the balance guesses while to keep estimates or guesses the balance sheet.

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