Some of the basic accounting terms that you will learn include revenues, expenses, assets, liabilities, income statement, balance sheet, and statement of cash flows. The first step in the accounting process is recording journal entries and naturally this requires a transaction. Often, a trial balance will need to be adjusted , which means things like depreciation , prepaid expenses, and accrued expenses are accounted for in the proper accounting period. I think for small business owners accounting seems like a daunting, mysterious task but it doesn’t have to be. Glad you took the time to write this up. You may think that hiring a good accountant is all you need to have a good accounting system, but this is not true.
Accounting is not super easy, but it is something anyone can learn if they want to. Understanding accounting can really help a person in the business world, even if they are not directly doing accounting work. However, defective computer programme and easy access to unauthorized person to the accounting programme may also result in the accounting errors.
To know more about Accounting Concepts are very necessary to learn because without this you can not understand the fundamentals of accounting. Now you are in position to understand different types of concepts for accounting profession. I hope, you will make certain new accounting concepts which will very useful for accounting and accounting profession. Accounting cycle means the repetition of a complete sequence of accounting procedures in appropriate order during each accounting period. The sequence of accounting procedures used to record, classify and summarize accounting information is often termed the Accounting Cycle.
Events are analyzed to find the impact on the financial position or to be more specific the impacts on the accounting equation. Transactions recorded in the general journal are then posted to the general ledger accounts The accounts classify accounting data into certain categories and they are recorded in general journal entries according to that classification. Unadjusted trial balance makes the next steps of accounting process easy and provides the balances of all the accounts that may require adjustment in the next step. Adjusting entries ensure that the revenue recognition and matching principles are followed.
Adjusting entries are required to be is because a transaction may have influence revenues or expenses beyond the current accounting period and to journalize to the events that not yet recorded. An adjusted trial balance contains all the account titles and balances of the general ledger which is created after the adjusting entries for an accounting period have been posted to the accounts. Cash flow statement , income statement , balance sheet and statement of retained earnings; are the financial statements that are prepared at the end of the accounting period. Accounting cycle is a continuous and fixed process which needs to be followed accordingly.