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Account Process

This document outlines the key steps in the accounting process: 1) collecting and analyzing source documents, 2) posting journal entries, 3) posting entries to ledger accounts, 4) preparing a trial balance, 5) making adjustment entries, 6) preparing an adjusted trial balance, 7) creating financial statements from the trial balance, 8) making post-closing entries, and 9) preparing a post-closing trial balance to carry balances forward to the next period. The process involves analyzing documents, recording transactions, adjusting accounts, and generating financial reports to assess a company's financial health.

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Mae Arogante
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26 views

Account Process

This document outlines the key steps in the accounting process: 1) collecting and analyzing source documents, 2) posting journal entries, 3) posting entries to ledger accounts, 4) preparing a trial balance, 5) making adjustment entries, 6) preparing an adjusted trial balance, 7) creating financial statements from the trial balance, 8) making post-closing entries, and 9) preparing a post-closing trial balance to carry balances forward to the next period. The process involves analyzing documents, recording transactions, adjusting accounts, and generating financial reports to assess a company's financial health.

Uploaded by

Mae Arogante
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Collecting and Analyzing Accounting Documents

It is a very important step in which you examine the source documents and analyze them. For example,
cash, bank, sales, and purchase related documents. This is a continuous process throughout the
accounting period.

Posting in Journal

On the basis of the above documents, you pass journal entries using double entry system in which debit
and credit balance remains equal. This process is repeated throughout the accounting period.

Posting in Ledger Accounts

Debit and credit balance of all the above accounts affected through journal entries are posted in ledger
accounts. A ledger is simply a collection of all accounts. Usually, this is also a continuous process for the
whole accounting period.

Preparation of Trial Balance


As the name suggests, trial balance is a summary of all the balances of ledger accounts irrespective of
whether they carry debit balance or credit balance. Since we follow double entry system of accounts,
the total of all the debit and credit balance as appeared in trial balance remains equal. Usually, you need
to prepare trial balance at the end of the said accounting period.

Posting of Adjustment Entries

In this step, the adjustment entries are first passed through the journal, followed by posting in ledger
accounts, and finally in the trial balance. Since in most of the cases, we used accrual basis of accounting
to find out the correct value of revenue, expenses, assets and liabilities accounts, we need to do these
adjustment entries. This process is performed at the end of each accounting period.

Adjusted Trial Balance

Taking into account the above adjustment entries, we create adjusted trial balance. Adjusted trial
balance is a platform to prepare the financial statements of a company.

Preparation of Financial Statements

Financial statements are the set of statements like Income and Expenditure Account or Trading and
Profit & Loss Account, Cash Flow Statement, Fund Flow Statement, Balance Sheet or Statement of
Affairs Account. With the help of trial balance, we put all the information into financial statements.
Financial statements clearly show the financial health of a firm by depicting its profits or losses.
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Post-Closing Entries

All the different accounts of revenue and expenditure of the firm are transferred to the Trading and
Profit & Loss account. With the result of these entries, the balance of all the accounts of income and
expenditure accounts come to NIL. The net balance of these entries represents the profit or loss of the
company, which is finally transferred to the owner’s equity or capital.

Post-Closing Trial Balance

Post-closing Trial Balance represents the balances of Asset, Liabilities & Capital account. These balances
are transferred to next financial year as an opening balance.

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