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Accounting For Managers - Accounting Process

Accounting Process Overview

   Posted On :  21.01.2018 07:25 am

During the accounting period the accountant records transactions as and when they occur. At the end of each accounting period the accountant summarizes the information recorded and prepares the trial balance to ensure that the double entry system has been maintained. This is often followed by certain adjusting entries which are to be made to account the changes that have taken place since the transactions were recorded. When the recording aspect has been made as complete and upto-date as possible the accountant prepares financial statements reflecting the financial position and the results of business operations. Thus the accounting process consists of three major parts:

i.The recording of business transactions during that period; ii.The summarizing of information at the end of the period and iii.The reporting and interpreting of the summary information.

The success of the accounting process can be judged from the responsiveness of financial reports to the needs of the users of accounting information. This lesson takes the readers into the accounting process.

Learning Objectives


After reading this lesson the reader should be able to:


o Understand the Rules of Debit and Credit

o Pass Journal Entries

o Prepare Ledger Accounts

o Prepare a Trial Balance

o Make Adjustment and Closing Entries

o Get Introduced to Tally Package

Contents

  1. the account
  2. debit and credit
  3. the ledger
  4. journal
  5. the trial balance
  6. closing entries
  7. adjustment entries
  8. preparation of financial statements
  9. introduction to tally package
  10. summary
  11. key words
  12. self assessment questions

The Account

The transactions that take place in a business enterprise during a specific period may effect increases and decreases in assets, liabilities, capital, revenue and expense items. To make up to-date information available when needed and to be able to prepare timely periodic financial statements, it is necessary to maintain a separate record for each item. For e.g. It is necessary to have a separate record devoted exclusively to record increases and decreases in cash, another one to record increases and decreases in supplies, a third one on machinery, etc. The type of record that is traditionally used for this purpose is called an account. Thus an account is a statement wherein information relating to an item or a group of similar items are accumulated. The simplest form of an account has three parts:

 

i.           A title which gives the name of the item recorded in the account

 

ii.         A space for recording increases in the amount of the item, and

 

iii.       A space for recording decreases in the amount of the item. This form of an account is known as a ‘t’ account because of its similarity to the letter ‘t’ as illustrated below:

 

               TITLE

  Left side        Right Side

(debit side)      (credit side)

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