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Most organization finds it a necessity to have an accounting cycle process with the aim of processing and organizing information and statements regarding their financial position at the end of each accounting period. This enable the stakeholder to project whether it is running at lose or making profit. Accounting process is an ongoing activity in a company and it is done repeatedly at the end of each accounting period. The accounting process varies significantly depending on various aspects such as the size of the organization in terms of operations and the number of accountants.
As the company expands its operations, the account complexity widens. Similarly, the number of accountant may also determine the accounting process. Companies are obligated to process financial information and must have a dedicated personnel assigned accounting labor. To meet their objectives, accountant must strictly follow the prescribed step by step process referred to as the accounting cycle (Kieso,2007,12th ed., Vol. 2). Quality service tax Inc. is a family operated company that started in 1997. At inception, the company had only two workers and had a partnership of two individuals. The company has since developed and has employed three employees to facilitate their growing operation and demands from its clients. One individual is assigned to fully oversee accounting cycle adhered to. The recent development at Quality service tax Inc, is the introduction of the automated software which is meant to reduce the burden of book keeping.
Accounting cycle process
Acounting cycle is a systematic process that follows generic steps of identifying and recording of business transactions then summarizing it and finally reporting to the management. The accounting cycle has a chain relationship with the previous stage in the accounting life cycle. The following is the Accounting cycle steps employed by Quality service tax Inc (Intermediate Accounting 12th Edition, Kieso, Weygandt, and Warfield).
Identification of the transaction is the initial step that triggers accounting cycle by identifying the transactions to be recorded. This entails pointing out transactions that have an economic value and can be expressed in monetary terms (Kieso, 2007 vol1). All sale or purchase transactions must be recorded in the accounting book.
Journalizing entails capturing transactions in a general journal which indicate information such as liability, asset, capital and stockholders’. Moreover, it shows the consequence of transactions which are generated from asset, liability, equity, expense and income.
Posting accounts is the third practice which involves transferring transactions records from a journal to the ledger book. The general ledger is organized in such a way that, all related transactions are wrapped together and summarized. For example, the account named “PURCHASES’’ will collect all purchases for that period.
A trial balance is list of all accounts and their balances for a particular accounting period. At the end of an accounting period, the company prepares a trial balance of all accounts in the same order they were posted in the ledger accou.............
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