Most organizations exist to provide products and services in the ultimate hope of making a surplus or profit for their owners, which they do by receiving payment in money for goods and services provided. The role of accounting system is to record these monetary effects and create information about them.
In our previous two posts you understand the basic principles underlying the balance sheet and profit and loss account and have an idea of what they look like. Before preparing these financial statements business need to know about events and transactions in business and summarized them that process called accounting process.
The accounting process using steps given below,
- Identify events and transactions using source documents.
- Enter them into prime entry books (day books).
- Analysis day books and copy them into ledger accounts using double entry system.
- Summarized all ledger accounts balances using trial balance.
- Identifying errors in accounting and correct them.
- Preparing corrected trial balance.
- Doing adjustments for financial statements needed.
- Preparing adjusted trial balance.
- Preparing the financial statements.
- Analyzing financial statements using other techniques.
In our next posts you can read all these steps with description please are kind enough let we know about your questions through comments.