hollyzed themes test: Accounting flowchart

introduction to bookkeeping: Historical of Financial Accounting

<div style="text-align: center;">Historical of Financial Accounting</div><div style="text-align: center;">( Go to <a href="http://bookkeeping-course.blogspot.com/2012/07/frist-introduction-to-accounting.html">the frist introduction to accounting bookkeeping</a> )</div> It is all too easy to think of ﬁnancial statements merely as pieces of paper with numbers written on them, rather than in terms of the economic events and physical assets for Ex. land - buildings - and equipment .. that underlie the numbers. However, if readers of ﬁnancial statements understand how and why ﬁnancial accounting began, and how ﬁnancial statements are used, they can better visualize what is happening within a business and why ﬁnancial accounting information is so important. Thousands of years ago - individuals or families were self-contained in the sense that they gathered their own food, made their own clothes, and built their own shelters. When specialization began, some individuals or families became good at hunting, others at making arrowheads, others at making clothing, and so on. With specialization came trade, initially by bartering one type of goods for another. At ﬁrst, each producer worked alone, and trade was strictly local. Over time, some people set up production shops that employed workers, simple forms of money were used, and trade expanded beyond the local area. As these simple economies expanded - more formal forms of money developed and a primitive form of banking began, with wealthy merchants lending proﬁts from past dealings to enterprising shop owners and traders who needed money to expand their operations. When the ﬁrst loans were made, lenders could physically inspect borrowers’ assets and judge the likelihood of repayment. Eventually, though, lending became much more complex. Industrial borrowers were developing large factories, merchants were acquiring ﬂeets of ships and wagons, and loans were being made to ﬁnance business activities at distant locations. At that point - lenders could no longer easily inspect the assets that backed their loans, and they needed a practical way of summarizing the value of those assets. Also, certain loans were made on the basis of a share of the proﬁts of the business, so a uniform - widely accepted method for expressing income was required. In addition, owners required reports to see how effectively their own enterprises were being operated - and governments needed information for use in assessing taxes. For all these reasons, a need arose for ﬁnancial statements - for accountants to prepare the statements, and for auditors to verify the accuracy of the accountants’ work. The economic systems of the industrialized countries have grown enormously since the beginning - and  the ﬁnancial accounting has become much more complex. However, the original reasons for accounting statements still apply: Bankers and other investors need accounting information to make intelligent investment decisions - managers need it to operate their organizations efﬁciently; and taxing authorities need it to assess taxes in an equitable manner. It should be no surprise that problems can arise when translating physical assets and economic events into accounting numbers. Nevertheless - that is what accountants must do when they construct ﬁnancial statements. To illustrate the translation problem - the numbers shown on the balance sheet to reﬂect a business’s assets and liabilities generally reﬂect historical costs and prices. However, inventories may be spoiled - obsolete - or even missing; land - buildings - and equipment may have current values that are much higher or lower than their historical costs - and money owned to the business may be uncollectible. Also, some liabilities - such as obligations to make lease payments, may not even show up in the numbers. Similarly, costs reported on an income statement may be understated or overstated, and some costs - such as depreciation, do not even represent current cash expenses. When examining a set of ﬁnancial statements - it is best to keep in mind the physical reality that underlies the numbers and also to recognize that many problems occur in the translation process. --------------------------------------------------------------------------------------------- The Users of Financial Accounting Information Regulation and Standards in Financial Accounting Financial Accounting Standards Board (FASB) Generally accepted accounting principles (GAAP) American Institute of Certiﬁed Public Accountants (AICPA) Basic Concepts of Financial Accounting The preparation and presentation of ﬁnancial accounting data is based ona set of principles, the most important of which are: (1) accounting entity,(2) going concern, (3) accounting period, (4) objectivity, (5) reliability,(6) monetary unit, (7) relevance, (8) full disclosure, (9) materiality, (10) conservatism, (11) consistency, and (12) comparability. <a href="http://bookkeeping-course.blogspot.com/2012/06/introduction-to-bookkeeping-accounting.html">The financial Accounting flowchart</a> This topic describes  the  financial accounting process.  It shows how  information about <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">transactions</a> and events is accumulated to produce the balance sheet and the income statement. This early presentation is quite basic; subsequent chapters will present more complex issues. the cash flow effects of various transactions are addressed in another topic, the statement of cash flows is actually covered in detail in other topic, “Statement of Cash Flows.” <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-equation-and-basic-elements.html">accounting equation</a> <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">Recording and Compiling Accounting Data</a> explain the following terms used in the recording and compiling of accounting data: • Transaction • Account • Posting • Chart of accounts • General ledger • T account • Double entry system

introduction to bookkeeping: Historical of Financial Accounting

Historical of Financial Accounting ( Go to the frist introduction to accounting bookkeeping ) It is all too easy to think of ﬁnancial state...

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the frist introduction to accounting bookkeeping

<div style="text-align: center;">the frist introduction to accounting bookkeeping</div><div style="text-align: center;">and the archive for our topics ( step by step )</div><div style="text-align: center;"> </div>Financial accounting involves identifying - measuring - recording - and communicating in dollar terms the economic events and status of an organization. This information is summarized and presented in ﬁnancial statements... the three most important being the income statement - the balance sheet - and the statement of cash ﬂows. Because these statements communicate ﬁnancial information about an organization, organizations must understand the basics of ﬁnancial accounting because ﬁnancial statements are the best way to summarize a business’s ﬁnancial status and performance. Our coverage of ﬁnancial accounting extends over several Topics. This topic begins with an introduction to basic ﬁnancial accounting concepts and then explains how organizations report ﬁnancial performance - speciﬁcally revenues, costs, and proﬁts. In other topics, the discussion is extended to the reporting of ﬁnancial status, which includes assets - liabilities - and equity. In addition, the reporting of cash ﬂows. another topics, discusses ﬁnancial statements - ﬁnancial statement analysis can be better understood after learning more about the ﬁnancial workings of a business. Bookkeeping blog will provide you with a basic understanding of how ﬁnancial statements are created and used to make judgments regarding the ﬁnancial condition of an organization. <a href="http://bookkeeping-course.blogspot.com/2012/07/introduction-to-bookkeeping-historical.html">Historical Foundations of Financial Accounting</a> <a href="http://bookkeeping-course.blogspot.com/2012/07/introduction-to-bookkeeping-users-of.html">The Users of Financial Accounting Information</a> Regulation and Standards in Financial Accounting Financial Accounting Standards Board (FASB) Generally accepted accounting principles (GAAP) American Institute of Certiﬁed Public Accountants (AICPA) Basic Concepts of Financial Accounting The preparation and presentation of ﬁnancial accounting data is based ona set of principles, the most important of which are: (1) accounting entity,(2) going concern, (3) accounting period, (4) objectivity, (5) reliability,(6) monetary unit, (7) relevance, (8) full disclosure, (9) materiality, (10) conservatism, (11) consistency, and (12) comparability. <a href="http://bookkeeping-course.blogspot.com/2012/06/introduction-to-bookkeeping-accounting.html">The financial Accounting flowchart</a> This topic describes  the  financial accounting process.  It shows how  information about <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">transactions</a> and events is accumulated to produce the balance sheet and the income statement. This early presentation is quite basic; subsequent chapters will present more complex issues. the cash flow effects of various transactions are addressed in another topic, the statement of cash flows is actually covered in detail in other topic, “Statement of Cash Flows.” <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-equation-and-basic-elements.html">accounting equation</a> <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">Recording and Compiling Accounting Data</a> explain the following terms used in the recording and compiling of accounting data: • Transaction • Account • Posting • Chart of accounts • General ledger • T account • Double entry system

the frist introduction to accounting bookkeeping

the frist introduction to accounting bookkeeping and the archive for our topics ( step by step ) Financial accounting involves identifying -...

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Introduction to bookkeeping: Accounting flowchart process

<div style="text-align: center;">Accounting Flowchart</div><div style="text-align: center;"></div><h3 class="r" style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: medium; margin: 0px; overflow: hidden; padding: 0px; text-align: center; text-overflow: ellipsis; white-space: nowrap;"> Financial Accounting & Bookkeeping Cycle Steps</h3><h3 class="r" style="background-color: white; color: #222222; font-family: arial,sans-serif; font-size: medium; margin: 0px; overflow: hidden; padding: 0px; text-align: center; text-overflow: ellipsis; white-space: nowrap;"> ( <a href="http://bookkeeping-course.blogspot.com/search/label/Basic%20Concepts">Basic Concepts</a> of Financial Accounting ) </h3><h3 class="r" style="background-color: white; color: #222222; font-family: arial,sans-serif; font-size: medium; margin: 0px; overflow: hidden; padding: 0px; text-align: center; text-overflow: ellipsis; white-space: nowrap;">  </h3><h3 class="r" style="background-color: white; color: #222222; font-family: arial,sans-serif; margin: 0px; overflow: hidden; padding: 0px; text-align: center; text-overflow: ellipsis; white-space: nowrap;"> describes  the  financial accounting process and shows how  information about transactions and events is accumulated to produce the balance sheet and the in- come statement. This early presentation is quite basic; subsequent chapters will pre- sent more complex issues. Also, although the cash flow effects of various transactions are addressed in another topic, the statement of cash flows is actually covered in detail in other topic, “Statement of Cash Flows.” </h3> <div style="text-align: center;"> </div>Introduction: Accounting is the art of <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">recording</a>, summarizing, classifying and reporting <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">financial transactions</a> and other events of an enterprise. The following flowchart shows the steps in the accounting cycle.  These are the accounting procedures normally used by enterprises to record transactions and prepare financial statements <div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0C-w7aw6g6DVvzgDQV5JWLDtSrsToYeq3yIqVX0eAympSx1qw_nZlR3bwAS7iBVZ8snomFJY9I3sISc5m4HgIrhBGFh6f3Pd57beIHgY3gguPsSAU__mpH70eSnM0NOJMH2vrx25eirY/s1600/record+transactions-1.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0C-w7aw6g6DVvzgDQV5JWLDtSrsToYeq3yIqVX0eAympSx1qw_nZlR3bwAS7iBVZ8snomFJY9I3sISc5m4HgIrhBGFh6f3Pd57beIHgY3gguPsSAU__mpH70eSnM0NOJMH2vrx25eirY/s1600/record+transactions-1.JPG" /></a></div><div style="text-align: center;">Image of Accounting flowchart Cycle Steps</div><div style="text-align: center;"> </div><div style="text-align: center;">and Below, the flowchart steps have been explained in detail:</div><div style="text-align: left;"> </div><a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">1. Transaction: </a>   The processing of accounting data begins with an <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">economic transaction</a>, where two or more parties engage in an exchange  of goods or services for some form of consideration. Evidence of this happening is the receipt  of some form of a source document. Common examples of such a source document include: •  A sales receipt - this can be in a variety of forms. •  A purchase invoice. •  A debit/credit memorandum. •  A copy of a contract entered into. •  A billing statement. •  A remittance statement. There are a multitude of source documents, in type, shapes, and format used to record the significant data. It is these documents, which become the basis for data input to the accounting processing. But, prior to the actual data entry, the documents must be subjected to a series of analysis and classification. 2. Analyze and classify: 2٫1.  Analyze:   This phase of the accounting process includes the application of several of the accounting principles, namely: The Entity Concept - This is probably the most basic of all concepts in accounting. As applied here in this phase of the accounting process, the analysis must determine that the transaction in question, first relates to the entity in question. If not it must be rejected and not allowed to continue through the process. Monetary Concept - In addition the analysis must determine that the transaction can be measured in terms of a monetary basis. Those transactions, which cannot be measured in terms of amount (for e.g., Saudi Riyals), are eliminated from further consideration for inclusion in the accounting process. Cost Principle - All transactions are recorded at cost and not at current market value. Cost is determined from the source documents used as evidence of the transaction. 2٫2.  Classify:   Once past the analysis phase, the transaction is then properly classified in preparation for entry into the accounting database, commonly using a Chart of Accounts. Chart of Accounts - The design of a good accounting system begins with the Chart of Accounts. This is a list of the accounts, which comprise the particular accounting system (it is designed with the particular company and its needs for information). Accounts are grouped according to their  relationship in the <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-equation-and-basic-elements.html">accounting equation</a> (i.e., assets, liabilities, owner's equity, revenues and expenses). The numberings scheme assigns a block of numbers to the respective groups. A typical assignment of numbers might be as follows: <div style="text-align: center;">Assets ......................  100-199 Liabilities .................  200-299 Owner’s Equity .........  300-399 Revenues .................  400-499 Expenses ..................  500-599</div>    The numbering blocks should provide a convenient manner for adding new accounts without having to renumber the accounts. Sometimes the account numbers are designed to provide additional information as to location, cost codes, etc. In any event they assist in arranging the accounts for convenience of  financial statement preparation, account location, and category identification. The next consideration is that of determining whether this <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">transaction when recorded in the account</a> will  cause the balance of that account to be increased or decreased. Depending upon the type of account and what side of the accounting equation it appears, this means it must be reported as a debit or a credit. Of course the basic rule of having debits and credits equal must be followed. That means each transaction will require at lease one debit and one credit identity to be recorded correctly. Finally, a transaction can affect multiple accounts, requiring more than one debit and/or one credit in order to properly record it in the accounting process. 3. Journalize: This step in the accounting cycle represents the first time that the transaction enters the accounting database. It is the data entry phase. Here the <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">transaction</a>, having been analyzed and classified, is recorded in the Accounting Voucher. In entering the transaction, various types  of vouchers depending on the type of organization are used.  However, the most  commonly used format of an accounting voucher is attached in Appendix.   Sometimes, accounting vouchers are not prepared and transactions are directly entered into Journals and this is for this reason that the journal is referred to as the "book of original entry."  The journal can be likened to a diary in which events are recorded in chronological order of their occurrence. In the accounting process, two types of journals are used: 3٫1.  General Journal   In the General Journal, transactions are recorded as they were analyzed and classified. First the event is dated as to when it actually happened. Then the debit side of the transaction is recorded first by itemizing the account(s) that must be debited. The amount(s) to be debited are then entered in the column to the left. This process is continued until all of the debits have been recorded. The recording shifts to the account(s) to be credited. The recording(s) for the credits are indented to offset them from the debit recording(s). After recording the account(s) to be credited, the amounts are then entered into  the column to the left of that of the debits. If the <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">transaction required only one debit  and one credit</a>, this is referred to as a simple entry. On the other hand, it is requires more than one <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">debit and/or credit</a>; it is referred to as a compound entry. 3٫2.  Special Journals    As their name implies, these journals  are used to record uniquely classified types of transactions by use of specially  designed journals. They are designed to meet the needs of the specific entity, which uses them. There is no common format for their design, as this is determined by the individual entities. However, the most commonly used special journals are as follows: •  Sales Journals - generally used to record  all credit sales of merchandise inventory items. •  Purchases Journals - generally used to record all credit purchases of merchandise inventory items. •  Cash Receipts Journals - generally used to record all inflows of cash. •  Cash Payments (Disbursement) Journals - generally used to record all outflows of cash. •  NOTE: The check register is sometimes used in place of the Cash Receipts and Cash Payments Journals. 4. Post:    Posting refers to the process of transferring or transcribing the information contained in the journal entries to the appropriate accounts in the general ledger. During this process debits in the journal entry are posted as debits in the ledger, and credits in the journal entry are posted as credits in the ledger. Along with the debits and credits, the information transferred includes the date of the journal entry and the voucher reference. This cross-reference is the audit trail by which a transaction can be traced from its entrance into the system via the journal/voucher to the final destination in the general ledger. This is an important part of the processing of accounting data. General Ledger    The general ledger is the heart of any accounting system. It is the permanent record of the consequences resulting from the accumulation of transaction throughout the life of the entity. Each account in the accounting system has its separate page in the general ledger. In addition each account has its unique identification in the form of an account number as specified in the Chart of Accounts. Subsidiary Ledger    An enterprise constantly needs detailed information about its dealings with individual customers and creditors.  To provide this information, companies with several thousand customers and  creditors, use a subsidiary  ledger to keep track of individual balances.  Thus  a typical merchandising enterprise has subsidiary ledgers containing accounts with customers (customers’ ledger)  and creditors (creditors’ ledger).  An account in the general ledger is maintained that summarizes the details in the accounts receivable and accounts payable  ledgers.  This summary account in the general ledger is called a control account, because the summary account controls the subsidiary ledger. 5. Trial balance:   Simply defined, a Trial Balance is a list of all of the general ledger accounts having a balance amount as of that date. It contains the following columns: •  Account Number (from chart of accounts) •  Account Title(s). •  Applicable debit amounts. •  Applicable credit balance. A trial balance provides a check on the accuracy of the postings, which occurred during the period by showing that the  total debits posted equals the total credits posted. It is prepared at any time, following the posting  of all journal entries. However, it is routinely prepared at the end of the accounting period, prior to making any adjustments to the books. Thus, the trial balance is a test of the mathematical equality of debits and credits after all postings have been completed. Its preparation is essential to the processing events leading up to the preparation of the financial statements. 6. Adjusting entries:    Throughout an accounting period, an entity will continue to be engaged in a variety of <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">economic transactions</a>. Some of those will affect the current period, while some of them will affect future periods throughout the life of the entity. At  the time that they occur, each of these transactions, are supported by a source document (see step 1 above). If they are applicable to the current period, their  flow through the accounting system is straight forward and without the need for any special handling or considerations.   However, those transactions, which effect the present and future accounting periods, will at some future date require special considerations and  handling. The special considerations are caused by absence of a source document, which gives cause to their existence. Keep in minds that these transaction either happened in a prior period or have not yet happened The special handling is a continuation of the special consideration, in that these  transaction must be dealt with in a manner which adjusts their effects in the current  period, by means of special  journal entries. Many have already been recorded in the accounting system. What is needed then is to ensure that their consequences are applied to the proper accounting period.  Some of the examples of adjusting entries are: •  Accruals •  Amortization of prepayments and intangibles •  Deferred revenues and expenses   Also some, balances have to be reclassified from one account to another for the purpose of proper presentation in the financial statements.  Some of the examples of such transactions are as follows: •  Reclassification of current portion of long-term loan from long term liability to current liability •  Reclassification of debit balances in creditors account •  Reclassification of credit balances in debtors account This, then, is accomplished through the use of <a href="http://bookkeeping-course.blogspot.com/2012/06/accounting-transaction-double-entry.html">Adjusting Entries</a> and Reclassifying entries. 7. Adjusted trial balance:   After all Adjusting Entries and Reclassifying Entries have been journalized and posted an ADJUSTED TRIAL BALANCE is prepared from the ledger accounts. It shows the balance of all accounts, including those that have been adjusted, at the end of the accounting period.  The purpose of an adjusted trial balance is to show the effects of all financial events that have occurred during the accounting period.   The financial statements are usually prepared from this trial balance. 8. Financial statements:    The following are the basic financial statements, which are prepared at the end of each accounting period. Each portrays a different representation of the entities financial status and results of activities. All of them are linked together in a manner, which presents the financial position and results of economic activities, and therefore all three must always be presented together. Income statement:  •  Presents the results of economic activities, which occurred during the specific accounting period. •   Bridges the balance sheet of the previous accounting period with that of the current accounting period. Therefore, it covers a period of time. •  Develops the net income for the current accounting period. This is used to reflect the profitability of that period. •  is linked to the balance sheet via the net income amount, which appears in both of those statements. Statement of Changes in Owners’ Equity     Presents the changes that have occurred  in the owner's equity as a result of the current period's activities. Therefore its results represent what occurred within a period of time. It is linked to the balance sheet via the capital account, retained earnings, and any reserves. Balance Sheet     Sometimes referred to as  the statement of financial  position, reports the assets, liabilities, and owner’s equity of an enterprise at a specific date. Statement of Cash Flows    The basic purpose of a statement of cash  flows is to provide relevant information about the cash receipts and cash payments of an enterprise during a period.  To achieve this purpose, the statement of cash flows reports the cash effects of: •  Operations during a period •  Investing transactions •  Financing transactions; and •  Net increase or decrease in cash during the period 9. Closing entries   Closing an account means to "bring the balance to zero". We close what we call the  temporary (or nominal) accounts. In the closing process all of the revenue and expense account balances (income statement items) are  transferred to a clearing or suspense account called Income Summary (or Income for the year), which is used only at the end of each accounting period (yearly).  Revenues and Expenses are matched in the Income Summary account and the net result of this matching, which represents the net income or net loss for the period, is then transferred to an owners’ equity account i.e., retained earnings.  All closing entries are posted to the appropriate general ledger accounts. 10.  Post closing trial balance    A trial balance is prepared after all temporary accounts have been closed. The accounts, which remain open are called  real accounts and include:  Asset accounts, Liability accounts and the Capital account. In other words, the balance sheet accounts remain open. Practical Session:    Although, an attempt has been made above to explain how an accounting cycle works, but in order to make the students understand the whole process of flow of transactions from beginning till the financial statements are produced, a practical session including the following steps is recommended: •  A chart of accounts should be created  keeping in view requirements of a service enterprise. •  Accounting vouchers must be prepared  for transactions affecting all aspects of the financial statements . •  Vouchers must be posted to their individual General Ledger Accounts using the form in Appendix ٢. •  A trial balance should be prepared using the final balances in general ledger. •  Adjusting and reclassifying entries must be prepared and then posted to general ledger. •  Adjusted trial balance should be prepared. •  Financial statements should be prepared from the adjusted trial balance. •  Closing process should be performed. •  A post closing trial balance should be prepared. •  Opening of a new accounting period in the books should be demonstrated using the post closing trial balance. <div style="background-color: white; color: #333333; font-family: Tahoma; font-size: 13px; line-height: 20px; text-align: center;">------------------------------------------------------------------------------------------------------</div><div style="background-color: white; color: #333333; font-family: Tahoma; font-size: 13px; line-height: 20px; text-align: center;">bookkeeping and financial accounting training course</div>

Introduction to bookkeeping: Accounting flowchart process

Accounting Flowchart Financial Accounting & Bookkeeping Cycle Steps ( Basic Concepts of Financial Accounting ) describes t...

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introduction to bookkeeping: Historical of Financial Accounting

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the frist introduction to accounting bookkeeping

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Introduction to bookkeeping: Accounting flowchart process

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