3 Essential Steps in the Accounting Process

Before you the Steps in the accounting process you should know about the accounting process. The accounting process has the following three steps:

Table of Contents

Steps in the accounting process

Identification
Recording
Communicating

Identification

Accounting identifies economic events that involve selecting the economic activities relevant to a particular organization.

Examples of economic events are the sales of goods by Square Ltd, the payment of Wages by ACME Laboratories Ltd., etc.

Recording

Accounting records economic events by keeping a systematic, chronological (one after another) diary of events measured in the monetary unit.

In recordings, economic events are also classified and summarized.

Communicating

Accounting communicates between the organization and interested users by providing financial information through accounting reports (financial statements).

The accounting process

Actually, the accounting process is a series of activities that start with a particular transaction and end with a structured closing. As a result, things are clear at a glance.

The accounting process is a connected and systematic working process that begins with the analysis of business transactions and stops with the preparation of post-closing trial stability.

According to the going concern idea, it is assumed that a business organization will run for an unspecified period.

But, this unspecified period is divided into small sessions to know the operating results and the financial situation of a business association.

The accounting process is a constitutional functioning process in determining these financial performances.

These approved rules of the accounting process require systematic and progressive recording of business transactions. The progressive working process of the accounting method is called considering the cycle.

This cycle begins with the judgment of business operations and ends with the arrangement of a post-closing trial balance.

The accounting functioning process starts with the identification of operation and it is journalistic.

After recording the activities in a journal, these are to be classified and posted to ledger accounts.

The trial balance is served with balances of ledger accounts to prove the arithmetical accuracy of reports.

After the maturity of the trial balance adjusting entries are passed for making the adjusted trial balance, and thereafter a worksheet is developed for the convenient establishment of true and fair financial statements.

For taking various economic decisions, the statements of accounts are interpreted and interpreted for providing necessary data.

After the preparation of financial records closing entries are passed for closing periodic payments and income to close these, and after that, a post-closing trial balance is prepared eventually with which the next year’s exercises start.

The steps in the cycle are presented in a sequence and are reproduced in each accounting point. If a reversing flag wasn’t set, the associated entry should be reversed manually, employing a new journal entry.

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