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Basic Accounting For IT Part II

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74 views

Basic Accounting For IT Part II

Uploaded by

mailbag6
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Basics of Accounting—

Part II: Closing the Books

an eprentise white paper

tel: 407.591.4950 | toll-free: 1.888.943.5363 | web: www.eprentise.com


Author: Brian Lewis
www.eprentise.com

© 2020 eprentise, LLC. All rights reserved.

eprentise, FlexField Express and FlexField are registered trademarks of eprentise, LLC.

Oracle is a registered trademark of Oracle Corporation.


All other company or product names are used for identification only and may be trademarks of their respective owners.
This is the second in a series of articles designed to help the more technical people understand the business.
They are intended as general reference material. A copy of the first article, Basics of Accounting: General
Ledger and Account Types, can be found here.

Books or ledgers are used to record the transactions. Closing the books is the process that a corporation
uses to reconcile, consolidate, and report financial information on a periodic basis. The process usually
involves the transfer of account balances from nominal (or temporary) accounts to real (or permanent)
accounts and generally involves five steps:

1. Closing each of the subledger modules (such as accounts payable or accounts receivable) and posting
the detailed transaction information from each module to the general ledger (for more information on
the general ledger, please see Basics of Accounting: General Ledger and Account Types).
2. Running trial balance reports to confirm that transactions from all modules have been posted correctly.
3. Reconciling to the general ledger and making adjusting entries.
4. Posting all adjusting entries to the general ledger.
5. Running standard financial reports.

As we noted in Basics of Accounting: General Ledger and Account Types, transactions create either a
debit or a credit entry to an account depending on the type of transaction made. Furthermore, debits and
credits are treated differently depending on the type of account the transaction is posted to. The following
table outlines some common accounts found on financial statements and how they are treated.

Account Name Account Type Debit / Credit

Assets Balance Sheet Debit

Liabilities Balance Sheet Credit

Stockholder’s Equity Balance Sheet Credit

Retained Earnings Balance Sheet Credit

Revenue Income Statement Credit

Expense Income Statement Debit

Sales Discounts Contra Debit

Sales Returns Contra Debit

Allowance for Bad Debt Contra Credit

Purchase Discounts Contra Credit


Curious?
For more information, please call eprentise at 1.888.943.5363 or visit www.eprentise.com.

About eprentise
eprentise provides transformation software products that allow growing companies to make their Oracle® E-Business
Suite (EBS) systems agile enough to support changing business requirements, avoid a reimplementation and lower the
total cost of ownership of enterprise resource planning (ERP). While enabling real-time access to complete, consistent
and correct data across the enterprise, eprentise software is able to consolidate multiple production instances, change
existing configurations such as charts of accounts and calendars, and merge, split or move sets of books, operating
units, legal entities, business groups and inventory organizations.

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