Scribd
Upload
404 views

Steps in The Accounting Process Assignment AIS

The accounting process involves 9 key steps: 1) identifying business transactions, 2) journalizing transactions, 3) posting journal entries to ledger accounts, 4) preparing an unadjusted trial balance, 5) journalizing adjusting entries, 6) preparing financial statements, 7) adjusting and closing books, 8) preparing a post-closing trial balance, and 9) optionally journalizing reversing entries. These steps are followed to systematically record business transactions, prepare financial reports, and ready the books for the next accounting period.

Uploaded by

Kathlene Balico
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
404 views

Steps in The Accounting Process Assignment AIS

The accounting process involves 9 key steps: 1) identifying business transactions, 2) journalizing transactions, 3) posting journal entries to ledger accounts, 4) preparing an unadjusted trial balance, 5) journalizing adjusting entries, 6) preparing financial statements, 7) adjusting and closing books, 8) preparing a post-closing trial balance, and 9) optionally journalizing reversing entries. These steps are followed to systematically record business transactions, prepare financial reports, and ready the books for the next accounting period.

Uploaded by

Kathlene Balico
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Steps in the Accounting Process

1. IDENTIFY BUSINESS EVENTS TO BE RECORDED (Gather information through source


documents) AND ANALYZE THE GIVEN TRANSACTION (Increase or decrease in an account)

Analyzing is examining economic events that have taken place and determining their effects on the
business. These transactions and events are generally supported by documentary evidence or proof.
For example, a sale of service or a sale of product is evidenced by a sales invoice. This sales invoice is
further supported by a delivery receipt.

2. JOURNALIZE THE TRANSACTIONS AND EVENTS in the General Journal (Book of Original
entry)

Recording or journalizing involves writing the effects of the transactions and events that have been
analyzed. The recording, whether done manually, or with data processing machines, includes the
inputting of information in accounting books called journals. These journals are:

(a) GENERAL JOURNAL – used to record all transactions not found in the special journals (e.g.
adjusting, closing, correcting entries, Sales returns on account and Purchase returns on account); or

(b) SPECIAL JOURNALS – used to record and post similar type of transactions for efficiency
and division of labor.

1. SALES JOURNAL – used to record sales of inventory on account/credit.


2. CASH RECEIPTS JOURNAL – used to record all receipts of cash (all transactions with debit
cash)
-Purchase returns on cash
-Collections of accounts
3. PURCHASES JOURNAL – used to record all purchases on account/credit.
4. CASH DISBURSEMENTS JOURNAL – used to record all cash payments (all transactions with
credit cash)
-Sales returns on cash
-Payment of accounts

3. POSTING THE JOURNAL ENTRIES in the General Ledger/T-account (Book of Final entry)

Posting is the process of transferring the recorded transactions in the journal to the accounts in
the ledger. A ledger is a group of related accounts and is called the book of final entry. The
objective of posting is to classify the effects of transactions on specific asset, liability, equity,
income and expense accounts. A company may maintain both a general ledger and subsidiary
ledgers depending upon its needs.
(a) GENERAL LEDGER - is the principal ledger which contains all the accounts that are reported in the
financial statements, namely: assets, liabilities, equity, income, and expenses. It also includes contra
and adjunct accounts.

(b) SUBSIDIARY LEDGERS - a list of individual accounts with common characteristics.


Contains detailed information on specific accounts on general ledger.

4. PREPARATION OF UNADJUSTED TRIAL BALANCE to verify the equality of debits and credits
This is the process of preparing a summary of the balances of the accounts in the general ledger
known as the trial balance. A trial balance is prepared to provide a convenient listing to check for
debit-credit equality and to provide a starting point for adjusting journal entries.

5. JOURNALIZE AND POST ADJUSTING JOURNAL ENTRIES


This is the process of gathering and putting together various data necessary to update the balances
of certain accounts in the books of the company. The objective of this accounting process step is to
record accruals, expiration of deferrals, estimations, and other events often not signaled by a new
source document.

6. PREPARING THE FINANCIAL STATEMENTS to provide information useful to external decision-


makers.
The adjusting data must be journalized and posted before the financial statements can be
prepared. This is because the data reported in the statements are taken from the updated balances
of the accounts in the general ledger. The financial statements are described as the end product of
the accounting process. PAS 1 provides that a complete set of financial statements shall consist of
the following:
a) Statement of financial position ( balance sheet)
b) Statement of comprehensive income
c) Statement of cash flows
d) Statement of changes in owner’s equity
e) Notes

7. ADJUSTING AND CLOSING THE BOOKS

The adjustments that were recorded in the work sheet are now formally recorded in the general
journal and posted to the accounts in the general ledger. The balances of the nominal (temporary)
accounts, which consist of income, expense, and drawing accounts, are then closed to income
summary account. When the closing process is completed, all nominal accounts will have a zero
balances.

8. PREPARING A POST-CLOSING TRIAL BALANCE to check for debit-credit equality after the
closing entries.

This step is done after all the balances of nominal accounts have been closed, that is, their
balances were reduced to zero. Therefore, a post-closing trial balance contains only the real
accounts (assets, liabilities and equity); the balances of these accounts are carried forward to the
next accounting period.

9. JOURNALIZE AND POST REVERSING JOURNAL ENTRIES to simplify certain subsequent


journal entries and reduce accounting costs ( this is an optional step)

The preparation of reversing entries is optional but it facilitates the recording of expense payments
and revenue receipts in the new period in the usual manner.

You might also like