As a bookkeeper, you complete your work by completing the tasks of the accounting cycle. It’s called a cycle because the accounting workflow is circular: entering transactions, manipulating the transactions through the accounting cycle, closing the books at the end of the accounting period, and then starting the entire cycle again for the next accounting period. Continue reading “Closing Entry in Accounting Cycle”
Small-business owners understand that the creation of an accounting worksheet ensures the tasks involved in developing the company’s financial statements become much easier. Worksheets also help accountants make sure the data in those statements is accurate and up to date. Each section of the worksheets must be divided into debit and credit columns. The totals of the debit and credit columns in each section must be equal to verify the accuracy of the record-keeping process.
1. Accounts And Trial Balance
The left column of the worksheet contains the list of accounts the company tracks for its records. The accounts are listed on the worksheet in a specific order: assets, liabilities, equity, revenue and expenses. As the accountant lists each item in the worksheet, he will also include its “trial balance.” Continue reading “5 Steps in preparing Accounting Worksheet”
Adjusting entries are usually made on the last day of an accounting period (year, quarter, month) so that the financial statements reflect the revenues that have been earned and the expenses that were incurred during the accounting period.
Sometimes an adjusting entry is needed because:
- revenue has been earned, but it has not yet been recorded.
- an expense may have been incurred, but it hasn’t yet been recorded.
Why Transactions Are Recorded
Have you ever forgotten to record a check in your checking account register? I sure have. It wasn’t a huge mistake on my part, but can you imagine what it would be for a business? Not recording something in the right place could significantly affect the financial statements for the business. That’s why it’s so important to record each and every business transaction that occurs in a business.
Transactions and Double-Entry Accounting
I am sure that you already know what a transaction is, but even so, let me refresh you on the concept. A transaction is an event that occurs in a business that changes the balance of at least two accounts. Continue reading “Principles of Accounting: Recording Transactions”