What Is an Accounting Document?
Accounting documents or statements are created to provide clear and precise data on the operating, economic, and cash flow outcomes of your company. This enables your business to assess your economic performance, planning, and forecasting. One of the dullest and upsetting duties to be performed by an accountant is to prepare accounting statements. But, you can never say no to an accounting statement because without it, you're company won't be able to succeed its operations.
How to Create an Accounting Document
Admit it, creating an accounting statement is a difficult task! But since we want to give you nothing but comfort, we created a step-by-step guide below to make your job a lot easier. Examine each step well and make sure you apply it in your day to day experience at work. Check this out!
1. Analyze your Financial Transactions
Every day, your company keeps a lot of transactions. You need to collect all business records related to any economic operations such as invoices, bank statements, and receipts. Check for any gaps, and make sure you have a full copy and record of these documents.
2. Prepare the Unbalanced Trial
Your unadjusted trial balance will be prepared at the end of every accounting period. This is achieved by summing up all the debit and credit accounts of your company and calculating your total balance sheet.
3. Post Transactions to Your Ledger
Your ledger consists mostly of your full company transactions journal entries, listed in chronological order. It has to demonstrate two accounts each time you enter a transaction, which is your debit and credit. The debit is exactly the same as the money that goes out from your company's account; meanwhile, the credit is the money that goes inside your company's account.
4. Create Submissions Of Adjustment Entries
It's time to adjust your entries after you input everything. Make sure your financial statements contain only appropriate data such as deferrals, accruals, missing transaction adjustments, and tax adjustments for a specific period of time. Deferrals are consisting of the list of money before you spend from the revenue. Meanwhile, accruals don't immediately record the revenue. The missing transaction adjustments will help you trace your forgotten transaction in bookkeeping while tax adjustments will state the tax deductions.
5. State the Adjusted Balance of Trials
Create another trial balance and verify all the entries you've created. The purpose of your adjusted trial balance is to demonstrate everything, even after all the adjustments that were made. Make sure everything is balanced in the sheets, or else you will review every document from the start.
6. State the Financial Statements
Finally, it's time for you to submit your accounts. Start with the income statement and balance sheet. Your balance summarizes the assets, liabilities, and equity of your company, while your income statement summarizes expenditures and earnings. Once both of them have been resolved, you can continue to review your cash flow and check your cash in and out for all business and performance operations.
What is Business Accounting?
Business accounting means keeping a systematic record of financial transactions and statements. The job also includes analysis, interpretation, and presentation of the business financial data in front of the board members. This analysis helps the members to make better decisions in future enterprises.
What is General Ledger Accounting?
A general ledger account is used to sort, summarize, and store a business or organization’s transactions. These sorts of accounts are arranged in a general ledger order with the balance sheet account being on the top. Asset accounts, liability accounts, stockholders' equity accounts are examples of such account types.
What is the Purpose of Accounting in Business?
Its purpose is to record all the financial transactions taking place in a firm. It analyzes the numbers to get a clear picture of the firm’s financial position and internal cash flows. When reported to the board members, it also helps in making several decisions on future business sessions.
What are the Components of Business Accounting?
- Source Document- It is a written document tracking business transactions.
- Input Devices- These are tools used to record transaction information.
- Information Processors- It frames the data from the inputs in reports.
- Information Storage- It stores the created reports.
- Output Devices- It includes hard processors like monitor, printers, etc.
What is the Difference Between Business Accounting and Financial Accounting?
- Financial accounting focuses on meeting the external financial standards and business accounting targets on fulfilling the internal business requirements.
- Financial accounting uses past data for preparing financial statements and business accounting for making decisions on future businesses.