While pursuing a management degree course, you might encounter an accounting subject. It is a broad subject that consists of several disciplines. To write accounting assignments, students must know the process of the accounting cycle. This procedure is followed to record all the financial transactions of a company, starting from the first financial transaction and ending with the closing of the accounts. This accounting cycle must be followed to keep track of all financial transactions so that you can evaluate the company's profits and losses for the entire year. However, it is not as simple as you think; students make silly mistakes in crediting and debiting transactions, and as a result, they receive low grades on their assignments. To cope with this problem, they seek accounting assignment help from subject-matter experts. If you are also one of them and are facing issues with accounting, then you are at the right place. Here you will learn the simple eight-step process of the accounting cycle that helps you understand the subject in detail.
Know the 8 Steps in the Accounting Process from Experts
Step: 1 Identify and Record the Transactions
The first and foremost step in the accounting cycle is to identify and record all the financial transactions of an organisation throughout the fiscal year. It is essential to record transactions accurately, which is why many businesses use different tools and software to record sales. Moreover, there are other transactions too that they need to record, such as debt payments, purchases, reimbursements, and employee payroll. The bookkeeper has to record the exact amount of any kind of transaction during this accounting cycle.
Step: 2 Journal Entries
The second step is to create journal entries for every transaction. The point at which transactions are recorded is determined by the entity's accounting policy, which is either accrual or cash. The accrual basis of accounting requires that revenues and expenses be recorded in the entity's books when they are earned and incurred, regardless of actual cash receipt and payment. In the case of cash accounting, transactions are recorded only when actual cash is received or paid. Every transaction in a dual entry system affects at least two accounts, i.e., one account is debited, and another account is credited. For example, if the purchases are made in cash, the purchases account will be debited, which means purchases will increase, and the cash account will be credited, which means cash will decrease.
Step: 3 Post It to General Ledger
After recording all the transactions in the journal, now move ahead and record them in the general ledger. It is also known as the "final book of entries." It allows bookkeepers to understand the financial condition of the company. This step of the accounting cycle is critical because it determines the company's finances by displaying how much income and expenses occurred in a year.
Step: 4 Generate a Trial Balance Report
Now moves on to the next step, the company's accountant must enter the data from the ledger into a trial balance at the end of the financial year. It was created to know the difference between the total debits and credits of the company. The accountant's role is to identify the unadjusted differences between debits and credits by creating a trial balance for a company.
Step: 5 Prepare Worksheet
This is the fifth step of the accounting cycle and involves preparing the worksheet of the organisation to identify the entries that need to be adjusted. Every company has to keep track of all the financial transactions that are recorded as credit or debit. And to ensure that the credit and debit balances are equal, this step is necessary.
Step: 6 Make Adjustment Entries
Making necessary adjustments to account for any accrual or deferral corrections is the final step before creating your financial statements. An example of an adjustment would be a salary or bill paid later in the accounting period. Because the cost was originally recorded as an account payable, an adjustment is required to remove the charge.
Step: 7 Make Financial Statements
In this seventh step of the accounting cycle, bookkeepers need to prepare the financial statements of the company, which consist of all the financial transactions within the accounting period. It includes ledgers, income statements, cash flow statements, and a balance sheet. All these financial statements give an overview of a company's finances.
Step: 8 Closing Entries
As it is the last step, you need to close the books for the current accounting period. Cross-check all the company's transactions, income statements, revenue, and expenses. Because the debit equals the credit,
nothing is carried forwards to the next fiscal year. Lastly, the accountant transfers the net income or loss to permanent accounts, like the retained earnings account.
You need to follow this accounting process to write your accounting assignments effectively. This will help you know what entries must be credited and what must be debited. Also, how to prepare the company's general ledger, trial balance, and worksheet. While writing accounting assignments, you will get to know how to maintain the financial records of the transactions, which will help you later.
Till now, you might have understood the eight-step process of the accounting cycle. So, if you have any doubts or queries about it, you can seek assignment help from professionals. They have command over all the essential accounting branches and know how to write assignments as per the Australian university guidelines. With the help of these accounting assignment writers, you will always secure high grades in your assignments.
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