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Journals Are Called Books of Original Entry Because This Is The Time That All of The Business Transactions Are Initially Recorded

Accounting provides quantitative financial information about economic entities to help with economic decision making. It involves identifying, recording, and classifying transactions, then journalizing, posting to ledgers, calculating a trial balance, recording adjustments, preparing financial statements, and closing out accounts in a multi-step cycle to accurately portray a company's financial position.

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Angelyn D. Pintacasi
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43 views

Journals Are Called Books of Original Entry Because This Is The Time That All of The Business Transactions Are Initially Recorded

Accounting provides quantitative financial information about economic entities to help with economic decision making. It involves identifying, recording, and classifying transactions, then journalizing, posting to ledgers, calculating a trial balance, recording adjustments, preparing financial statements, and closing out accounts in a multi-step cycle to accurately portray a company's financial position.

Uploaded by

Angelyn D. Pintacasi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Accounting is defined as a service activity.

Its
function is to provide quantitative information,
primarily financial in nature, about economic
entities that is intended to be useful in making
economic decisions.

The users of accounting information are the


external and internal users. The information will
be used as an overview of the business to come
up with the right and legal decisions for the
entity. The users of financial statements are
investors, lenders, suppliers and other trade
creditors, employees, customers, governments
and their agencies, and public. The information
needs to be accurate, timely, complete, concise
and relevant.

The first step in accounting cycle is identifying and


analyzing the transactions. The second step is journalizing
the transactions. Once a transaction is recorded as a journal
entry, it should post to an account in the general ledger. A
trial balance is calculated as the fourth step in the
accounting cycle. Recording adjusting entries is the fifth
step. Next is preparing the adjusted trial balance. Then,
preparing financial statements are done. The eight step is
recording the closing entries. Preparing a closing trial
balance is the ninth step. Lastly, recording reversing entries.
Each step in the accounting cycle plays an important role in
creating accurate entries and managing the company's
finances each time a purchase is made or revenue is
earned. An accounting process allows the business to
understand their past activity and where they currently stand
in order to plan for the future. Each step is related to one
another to make the accounting work done correctly.

Journals are called books of original entry because this


is the time that all of the business transactions are
initially recorded.
In general journals, all the transactions are
recorded in the form of two or more-line entries
whereas in special journals, all the transactions
are recorded in the form of single line entry.
General ledger is the set of master accounts
where transactions are recorded while subsidiary
ledger has the set of accounts that are linked to
the general ledger.

Trial balance does not prove the accuracy of


accounting work done because it does not justify
that the accounts are free from any errors.
Having the debit and credit side match on the
trial balance does not always prove that all the
transactions have been recorded in the proper
accounts.

The common types of adjusting data are accrued


revenues, accrued expenses, deferred revenues,
prepaid expenses and depreciation. The purpose
of adjusting entries is to convert cash transactions
into the accrual accounting method and to ensure
that the financial statements will reflect accurate
data.

Accountants prepare worksheet even if its


preparation is optional to see account balances, to
ensure that accounting entries are derived
correctly and to know how adjusting entries would
affect the ledgers before they prepare their
financial statements.
A complete set of financial statements includes a
statement of financial position, a statement of
comprehensive income, a statement of cash flows and a
statement of changes in shareholders' equity. The
statement of financial position also known as a Balance
Sheet represents the Assets, Liabilities and Equity of a
business at a point in time. The statement of
comprehensive income is a financial statement that
summarizes both standard net income and other
comprehensive income (OCI). Statement of cash flows is
a financial statement that shows how changes in balance
sheet accounts and income affect cash and cash
equivalents, and breaks the analysis down to operating,
investing, and financing activities. A statement of
shareholder’ equity is a section of the balance sheet that
reflects the changes in the value of the business to
shareholders from the beginning to the end of an
accounting period. Notes to financial statements provide
additional information pertaining to a company's
operations and financial position and are considered to
be an integral part of the financial statements. The notes
are required by the full disclosure principle.

The first step in accounting cycle is identifying and analyzing and classifying transactions. The
second step is journalizing the transactions. Once a transaction is recorded as a journal entry, it
should post to an account in the general ledger. A trial balance is calculated as the fourth step in the
accounting cycle. Recording adjusting entries is the fifth step. Next is preparing the adjusted trial
balance. Then, preparing financial statements are done. The eight step is recording the closing
entries. Preparing a closing trial balance is the ninth step. Lastly, recording reversing entries. Each
step in the accounting cycle plays an important role in creating accurate entries and managing the
company's finances each time a purchase is made or revenue is earned. An accounting process
allows the business to understand their past activity and where they currently stand in order to plan
for the future. Each steps are related to one another in a way that it should be the order of the actions
to be done correctly.
If reversing entries are made, the adjusting entries
that would be reversed are accrued income,
accrued expense, unearned revenue using the
income method and prepaid expense using the
expense method.
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