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Analyzing and Classify Data About An Economic Event

The document outlines the key steps in the accounting process: 1) Analyzing economic events and documenting them through receipts and invoices. 2) Recording transactions in the general journal with debits and credits. 3) Posting transactions from the general journal to ledger accounts. 4) Preparing an unadjusted trial balance to check that debits equal credits. 5) Making adjusting entries to comply with accounting principles. 6) Preparing an adjusted trial balance and using it to create financial statements.

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Arly Kurt Torres
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609 views

Analyzing and Classify Data About An Economic Event

The document outlines the key steps in the accounting process: 1) Analyzing economic events and documenting them through receipts and invoices. 2) Recording transactions in the general journal with debits and credits. 3) Posting transactions from the general journal to ledger accounts. 4) Preparing an unadjusted trial balance to check that debits equal credits. 5) Making adjusting entries to comply with accounting principles. 6) Preparing an adjusted trial balance and using it to create financial statements.

Uploaded by

Arly Kurt Torres
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Analyzing and Classify Data about an Economic Event

Identifying the transactions from the events is the first step in the accounting process.

Events are analyzed to find the impact on the financial position or to be more specific
the impacts on the accounting equation.

Documents such as; a receipt, an invoice, a depreciation schedule, and a bank


statement, etc. provide evidence that an economic event has actually occurred.

2. Journalizi

Transactions having an impact on the financial position of a business are recorded in


the general journal.

In the general journal, the transactions are recorded as a debit and a credit in
monetary terms with the date and short description of the cause of the particular
economic event.

3. POSTING FROM THE JOURNALS TO THE LEDGER

Transactions recorded in the general journal are then posted to the general ledger
accounts.

The accounts classify accounting data into certain categories and they are recorded in
general journal entries according to that classification.

Depending on the frequency of the transactions posting to ledger accounts may be less
frequent.

4. PREPARING THE UNADJUSTED TRIAL BALANCE

To determine the equality of debits and credits as recorded in the general ledger, an
unadjusted is prepared. It is a way to investigate and find the fault or prove the
correctness of the previous steps before proceeding to the next step.

Unadjusted trial balance makes the next steps of the accounting process easy and
provides the balances of all the accounts that may require an adjustment in the next
step.
The unadjusted balance sheet is for internal use only.

5. RECORDING THE ADJUSTING ENTRIES

Adjusting entries ensure that the revenue recognition and matching principles are
followed. To find the revenues and expenses of an accounting period adjustments are
required.

Adjusting entries are required to be is because a transaction may have influence


revenues or expenses beyond the current accounting period and to journalize to the
events that not yet recorded.

6. PREPARING THE ADJUSTED TRIAL BALANCE

An adjusted trial balance contains all the account titles and balances of the general
ledger which is created after the adjusting entries for an accounting periodhave been
posted to the accounts.

It is an internal document and is not a financial statement.

It helps to create the income statement and balance sheet and provide enough
information for preparing the cash flow statement.

7. PREPARING THE FINANCIAL STATEMENT

Financial statements are prepared from the balances from the adjusted trial balance.
The financial statements are made at the very last of the accounting period.

Cash flow statement, income statement, balance sheetand statement of retained


earnings; are the financial statements that are prepared at the end of the accounting
period.

This is the output of the accounting process, which is used by the interested parties
both within and out of the organization.

8. RECORDING CLOSING ENTRIES

At the end of an accounting period, Closing entries are made to transfer data in the
temporary accounts to the permanent balance sheet or income statement accounts.
Transferring the balances of the temporary accounts or nominal accounts (e.g. revenue,
expense, and drawing accounts) to the owner’s equity or retained earnings account is
used because these types of accounts only affect one accounting period.

9. PREPARING A CLOSING TRIAL BALANCE

To make sure that debits equal credits, the final trial balance is prepared. As the
temporary ones have been closed only the permanent accounts appear on the closing
trial balance to make sure that debits equal credits.

10. RECORDING REVERSING ENTRIES

Posit closing entries is an optional step of the accounting cycle. A reversing journal
entry is recorded on the first day of the new period for avoiding double counting the
amount when the transaction occurs in the next period.

The primary objective of the accounting cycle in an organization is to process financial


information and to prepare financial statements at the end of the accounting period.

An accounting cycle is a continuous and fixed process that needs to be followed


accordingly. Maintenance of the continuity accounting cycle is important.

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