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Accounting Process Presentation

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Kriyanshi Porwal
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9 views

Accounting Process Presentation

Uploaded by

Kriyanshi Porwal
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Accounting Process Overview

Steps with Examples


Step 1: Identifying Transactions
• The first step is to identify financial
transactions. A financial transaction is any
event that has a monetary impact on the
business.

• Example:
• A business purchases inventory for $1,000.
This transaction needs to be recorded in the
accounting system.
Step 2: Recording Transactions
(Journalizing)
• Recording transactions in the accounting
journal, known as journalizing, includes
writing down the date, accounts affected, and
amounts.

• Example:
• Debit Inventory $1,000; Credit Cash $1,000, to
record the purchase of inventory.
Step 3: Posting to Ledger
• After journalizing, transactions are posted to
the ledger accounts where all the debits and
credits are grouped together.

• Example:
• The $1,000 inventory purchase is posted to
the Inventory account (debit) and Cash
account (credit) in the ledger.
Step 4: Preparing a Trial Balance
• A trial balance is prepared to ensure that all
the debits equal the credits after posting the
transactions to the ledger.

• Example:
• If total debits and credits both equal $10,000,
then the trial balance is considered balanced,
indicating no errors in the accounting entries.
Step 5: Making Adjusting Entries
• Adjusting entries are made at the end of the
accounting period to account for accruals and
deferrals.

• Example:
• If $200 of prepaid insurance has expired, an
adjusting entry would debit Insurance Expense
$200 and credit Prepaid Insurance $200.
Step 6: Preparing Financial
Statements
• The financial statements are prepared,
including the income statement, balance
sheet, and cash flow statement.

• Example:
• The income statement would show revenues
of $50,000 and expenses of $30,000, resulting
in a net income of $20,000.
Step 7: Making Closing Entries
• Closing entries are made to transfer the
balances of temporary accounts (e.g., revenue
and expense accounts) to permanent
accounts.

• Example:
• The net income of $20,000 is transferred to
the Retained Earnings account.
Step 8: Post-Closing Trial Balance
• The post-closing trial balance is prepared to
ensure all temporary accounts are closed and
the accounting records are ready for the next
period.

• Example:
• If all revenue and expense accounts show a
zero balance, the accounts have been closed
successfully.

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