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| Accounting Training In Jaipur |
It
is a process of identifying, collecting, and summarizing financial transactions
of the company with the aim of generating useful information in the form of
three financial statements that are income Statement, Balance Sheet, and Cash Flows. It starts with an accounting transaction &
ends when the books of accounts get closed.
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Here are the following 9 steps of the accounting cycle :
1: Collection of data & analysis of transactions
In
this step of the accounting cycle, the accountant of the firm collects the data
& analyzes the transactions.
For
the proper running business, the accountant needs to look at every transaction,
find out why it took place, put it under the correct accounts, and then analyze
it.
2: Journalizing
After
collecting & analyzing the transactions, now the entries into the first
books of accounts are recorded.
In
this second step, each transaction is shifted to the general journal. And under
each entry, a narration is written to specify the reason behind debiting or
crediting an account.
3: Record the journals into the ledger accounts.
With
this step, the accountant will record the entries into the secondary books of
accounts.
That
is if there are cash & capital, there will be 2 ‘t-tables’ in the general
ledger and then the balances of individual accounts will be transferred.
4: Creating an unadjusted trial balance
An
unadjusted trial balance is prepared from the closing balances of the general
ledger accounts.
In
this trial balance, the dr. balances will be recorded on the dr. Side & the
credit balances will be recorded on the cr. side.
After
that, the debit side is totaled & the credit side is also totaled.
Then
the accountant will see whether both the side have alike balances or not.
5: Performing adjusting entries
After
the unadjusted trial balance, the adjusting entries will be prepared.
The
adjusting entries are generally related to periodical depreciation adjustments,
accrual adjustments, or amortization adjustments.
No, the adjusted trial balance would be prepared without performing these adjusting
entries.
6: Creating adjusted trial balance
Now
it’s time to make a new trial balance.
This
trial balance is known as an adjusted trial balance since it is prepared after
the adjustment entries are passed and this trial balance can be used to prepare
the most essential financial statements.
7: Create all the financial statements from the trial balance
All
the financial statements are born from the adjusted trial balance. There are
four most significant financial statements that are prepared using the adjusted
trial balance.
·
Income statement
·
Balance Sheet
·
Shareholders’ Equity Statement
·
Cash flow Statement
8: Closing the books
Closing
the books refer to that all financial statements are prepared and all
transactions in accounts have been recorded, analyzed, summarized, and
recorded.
9: Create a post-closing trial balance
To
make sure that the accounting transactions are adequately recorded, analyzed,
and summarized, a post-closing trial balance is created.
In
this step, the accounts are considered and then the closing balances are
recorded as per their respective position.
After
that the cr. side and the dr. the side is being matched to see whether
everything is in the correct order or not.
