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REVIEW OF ACCOUNTING PROCESS

The accounting process can be described as a set o

procedures used in identi!ing" recording" c#assi!ing" and

interpreting inor$ation re#ated to the transactions and other

e%ents o a business enterprise&

Accounting s!ste$

'eans b! (hich a reporting entit! records and stores theinancia# and $anageria# inor$ation ro$ its transactions or

e%ents so that it can retrie%e and report the inor$ation in an

accounting state$ent&

E#e$ents)

*oo++eeping s!ste$

Records and reports

Procedures

State$ent o accounting po#icies and standards

Personne#

E,uip$ent and de%ices

S!ste$s o *oo++eeping-oub#e entr! boo++eeping

Vie(s a transaction as ha%ing ./o#d eect on accounting

%a#ues

Sing#e entr! boo++eeping

As a genera# ru#e" on#! cash and persona# accounts are

recogni0ed

-oub#e entr! accounting

*asic accounting e,uation) Assets 1 2iabi#ities 3 O(ners4

E,uit!

-ebits are entries on #et side o accounts and credits are

entries to right side o accounts&

5ourna# entries pro%ide a s!ste$atic $ethod or su$$ari0ing a

business e%ent4s eect on the basic accounting e,uation&

Su$$ar!

Assets are increased b! debits and decreased b! credits&

2iabi#it! and o(ners4 e,uit! accounts are increased b! credits

and decreased b! debits&

O(ners4 e,uit! or a corporation inc#udes capita# stoc+ and

retained earnings accounts&

Re%enues" e6penses" and di%idends re#ate to o(ners4 e,uit!

through the retained earnings account&E6pense and di%idends are increased b! debit and decreased

b! credits&

Re%enues are increased b! credits and decreased b! debits&

Re%enues 7 e6penses 1 net inco$e or the period" (hich

increases o(ners4 e,uit! through retained earnings&

O%er%ie( o the Accounting Process

Recording Phase

A& Ana#!0e business docu$ents8ascertain (hat transactions

and e%ents shou#d be recorded&

Transactions / Transactions are e%ents that transer or

e6change goods or ser%ices bet(een t(o or $ore entities&

Rea# accounts 7 are ba#ance sheet accounts 9asset" #iabi#it!" or

e,uit! account:

No$ina# accounts/ are inco$e state$ents accounts 9re%enue

or e6pense account:&

*& Record transactions8origina##! record debits and credits in

chrono#ogica# order in a ;ourna#&

5ourna# / so$eti$es reerred to as the boo+ o origina# entr!& A

genera# ;ourna# is $ere#! a chrono#ogica# #isting o

transactions e6pressed in ter$s o debits and credits to

particu#ar accounts&

T!pes o 5ourna# EntriesAs to the ti$e prepared

Opening entr!

Current entries

Ad;usting entries

C#osing entries

Re%ersing entries

Correcting entries

Rec#assiication entries

As to or$

Si$p#e ;ourna# entr!

Co$pound ;ourna# entr!

T!pes o 5ourna#

Si$p#e ;ourna#

Genera# ;ourna#

Co$bination ;ourna#

Specia# ;ourna#

Cash receipts ;ourna#

Cash disburse$ent ;ourna#

Sa#es ;ourna#

Purchase ;ourna#

Voucher register

Re,uisition ;ourna#

Finished goods ;ourna#

Factor! ;ourna#

Voucher s!ste$ 7 a specia# $ethod o accounting or business

transactions (hich in%o#%es the pa!$ent o cash i$$ediate#!

or in the uture& It is one o the $eans o estab#ishing interna#

contro# o%er the e6penditure o the business&

*oo+s o accounts used)

Voucher register

Chec+ register

Sa#es registerCash receipts ;ourna#

Genera# ;ourna#

C& Post transactions8transer debits and credits to #edger

accounts (hich su$$ari0e changes in inancia# state$ent

e#e$ents 9assets" #iabi#ities and o(ners4 e,uit!" re%enues" and

e6penses:&

2edger 7 reer to the boo+ o ina# entr!& Su$$ari0ed the tota#

credits and tota# credits posted per account&

Posting 7 Transerring a$ounts ro$ a ;ourna# to the #edger&

Transactions recorded in a genera# ;ourna# $ust be posted

indi%idua##!" (hereas entries $ade in specia#i0ed ;ourna#s are

genera##! posted b! co#u$nar tota#&

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