Describe the steps used for the accounting record-keeping process

Answer 1

OVERVIEW OF THE ACCOUNTING RECORD-KEEPING PROCESS

The accounting record-keeping process generally involves the following steps:

1 . Recording each transaction in a file or other record in the form of a journal entry.

2 . Posting the amounts from the journal entries to individual balance sheet and income statement accounts in a general ledger. In computerized systems, posting occurs instantly and automatically after journalizing. T-accounts are useful devices for textbook illustrations and end-of-chapter problems to accumulate the effects of transactions on balance sheet and income statement accounts.

These first two steps occur daily (and perhaps many times during a day). The remaining steps typically occur at the end of the accounting period:

3 . Making adjusting journal entries to the accounts to correct errors and to reflect the financial statement impacts of items that occur because of usage or the passage of time.

4 . Preparing the income statement for the period from amounts in the income statement accounts.

5 . Closing the temporary income statement accounts to retained earnings.

6 . Preparing the balance sheet from amounts in the balance sheet accounts.

7 . Preparing the statement of cash flows from balance sheet amounts and from details of transactions affecting the cash account.