The accounting cycle can be regarded as a collection of tasks that are essential in recognising, documenting as well as evaluating a company’s transactions data. If you use an accounting service in Johor Bahru, the external accountant must compile these transactions and turn them into financial statements once the financial period ends . Keep in mind that the accounting cycle is the core task that an accounting division involves on a continuous basis (Also see Importance of Accounting During A Financial Storm). This short article will emphasise on the significant areas of accounting feature that make the accounting cycle.
Determining an occasion that creates an accounting transaction
This is the first action in accounting procedure as well as entails precisely recognising what created a transaction. For instance, paying a supplier, receive payment from customers, incur expenses for marketing and sales of goods are a few of the occasions that can trigger a transaction.
Documentation preparation work related to the transaction
Such company files might consist of consumers’ billing, vendors’ billing, payment vouchers, petty cash claims, as well as the payroll summary. These files serve as the supporting documents as they supply the first details about the transaction.
Recognition of the accounts influenced by the transaction
According to the double-entry system, a single transaction impacts 2 or more accounts. As a result, the accounting professional needs to recognise the accounts impacted by the transaction before keying in the transaction.
Keying in each transaction in the suitably
In this action, the accounting professional ought to key in the accounting details in the specific journals consisting of receipts journal, payment journals, sales journal and purchase journal which are moved to the general ledger after necessary adjustment entries are made (Also see Importance of Adjustment Entries). Besides, you can publish such transactions straight to the general ledger when necessary.
Preparation of initial trial balance
Once you have completed the above accounting flow, you will then require preparing an initial trial balance (Also see Steps to Prepare Trial Balance). You need to summarise all credit columns in the right column and the debits in the left column. Keep in mind that the aggregate of the credit side needs to match exactly with the aggregate of the debit side.
Compilation of the extended trial balance
After preparing the initial trial balance, you are required to do a quick review for any mistakes as well as remedy them with the necessary adjustments. The extended trial balance should mirror the output of the Profit and Loss as well as the Balance Sheet of business.
Compiling the financial statements from the extended trial balance.
After preparing the extended trial balance, you can then produce the financial statements. These consist of:
- Profit and Loss
- Balance Sheet
- Statement of cash flows (Also see Cash Flow Forecasting Mistakes You Cannot Afford to Make)
- Statement of changes in equity
- The relevant disclosures
Finalise the account for that financial year
Finalising the accounts includes changing all the momentary accounts balances into the summary account and eventually flow to the retained earnings account.
Solid understanding of the accounting cycle is vital to making sure that all the required accounting tasks are done properly. Additionally, you can take into consideration engaging an accounting firm in Johor Bahru to allow the professionals to help you.