Accounting For Managers - Accounting Process
Accounting Process Overview
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:
- the account
- debit and credit
- the ledger
- journal
- the trial balance
- closing entries
- adjustment entries
- preparation of financial statements
- introduction to tally package
- summary
- key words
- 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 âtâ account
because of its similarity to the letter âtâ as illustrated below:
TITLE
Left side Right
Side
(debit
side) (credit side)
