After all transactions have been posted to the general ledger, it is possible to prepare the trial balance. The trial balance will take all accounts from the general ledger and make sure that debits are equal to credits.
If debits are not equal to credits, it is evidence that there has been an error at some point in the accounting cycle. If this is the case, the organization will need to look through journal entries in an attempt to locate the source of the error Hunt At my company, we use accounting software that immediately alert the accounting department if a discrepancy exists. In addition, the software has many safeguards in place to prevent incorrect journal entries from being made in the first place.
The next step is to record any adjusting entries that may be required at the end of the accounting period. Companies will often be required to record items like deferred revenue or estimated expenses. Once these variable items have been realized as an exact amount, the company must add journal entries to offset the estimated amounts. After the adjusting entries have been recorded, an adjusted trial balance must be prepared to ensure that debits and credits are still equal.
Again, if any discrepancies exist, the company will be required to research the source of the error and make the necessary corrections. Now that the adjusted trial balance has been prepared, it is possible to create financial statements. The most important financial statements include the income statement, balance sheet, statement of retained earnings, and statement of cash flows.
Each of these financial statements serves a unique purpose and is designed to communicate financial data in the most easily understood format. The income statement is designed to show the profit or loss during the period by comparing revenues to expenses.
Preparing these statements accurately is essential to maintaining a history of sound recordkeeping. Public companies must be especially accurate with record keeping because they are regulate by the Securities and Exchange Commission and are required to produce quarterly and annual reports for investors. Negligent or fraudulent financial reporting can lead to investigation and penalties enforced by the SEC. In addition to the financial statements listed above, the data gathered during the accounting cycle can be used to prepare managerial financial statements to aid the decision making process of management.
At my company, the sales department relies heavily on the internal financial statements produced each quarter. The results of certain financial measures will determine whether or not the sales department will get a bonus and also measures individual employees performance. Without an efficient system of recordkeeping, it would be very difficult and time consuming for the sales department to track all of this data. The final step in the accounting cycle is to close out any temporary accounts that were used during the period.
Certain scenarios may require a company to use temporary accounts to record revenues and expenses. It is essential to for these accounts to be closed out and added to permanent accounts at the end of the accounting cycle. Failing to perform this step would lead to certain income and expense accounts not being recorded accurately. Generally Accepted Accounting Principles outlines how these closing entries should be entered. Lastly, a closing trial balance should be prepared once again verify that debits and credits are still equal.
I cannot relate to and is not familiar with the whole accounting cycle because my main responsible are to process accurate and timely payment of all invoices for the accounts payable department. The information discussed will come from this week reading and information I researched from the web. The first step of the accounting cycle is identifying and recording of the transaction.
In order to record or enter a transactions it must be identify what needs to be recorded first. Example of what would be identified and analyzed to enter a transaction is checks, bank statements, and purchase orders. Once the analyzing is completed the second step occur, which is journalize.
A journal is a complete record of each transaction. Journalize are completed by taking the journal entries, assigning each entries to an asset, liability, equity, expense or revenue account or accounts to a debit and credit. I do journal entries at my job but I not sure how they relate to the accounting cycle. I usually do journal entries to correct an account number or cost center.
Once the journal is completed the next step is posting. Posting is transferring information from the journal to the ledger. A ledger is a collection of all accounts that shows the number of details about a company's accounts in other words it a summary of each account.
I am familiar with how to look at the ledger to see if a journal entry posted to the correct account number. My supervisor review and approve the journal entries before they are post to the ledger. I also use the ledger when a manager inquires about a charges or payment within his or her cost center.
The reminding accounting cycle steps are the ones that I am not fully familiar with. I know the following steps are taken place at my organization, just not familiar what area or person does them. After the posting has taken place the next step is to prepare unadjusted trail balance.
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About: Paper explaining the overall accounting cycle at your organization. Include a description of the people, processes, and systems that are integral to the cycle. Include a description of the people, processes, and systems that are integral to the cycle.
Paper Masters Custom Research Papers on The Accounting Cycle. Paper Masters writes custom research papers on The Accounting Cycle and looks into the different members of an accounting department and each member's responsibilities. Accounting Cycle Paper Acc Date Accounting Cycle Paper Accounting is a financial information system designed to record, classify, report, and interpret financial data.
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