Business Models

Accounting Cycle, Know the Main Stages to How to Make It

The field of accounting does have a very important role so that the sustainability of a company or business can be monitored properly. This is suspected because accounting has the main objective as a provider of information that can be used to make important decisions in maximizing the performance of a business.

To be able to get the information needed, an accountant will usually carry out a variety of activities. Accountants are responsible for collecting data and process it systematically in a certain period of time. Usually, the series is carried out in one year.

The accounting process or accounting cycle is the activity of collecting and processing data in one period of time. In other words, the accounting cycle can be interpreted as the process of preparing financial statements. Of course, the financial statements must be made in detail and can be accounted for. If you are looking for an accountant with impressive quality, you might be able to visit lokalerevisorer.dk.

For that, for those of you who intend to compile an accounting cycle, consider the following important stages.

Identify Transactions

In compiling the accounting cycle, the first thing to do is to collect all the transactions in a certain period. You need various sources of transaction documents such as invoices, receipts, cash receipts, and so on.

Move the Contents of the Accounting Transaction Journal to the General Ledger

The journal of accounting transactions is a summary and record of transactions carried out by companies or businesses. In transferring records in the journal to the general ledger, it must be adjusted to the type of transaction and also the estimated name of each transaction. That way, accounting reports in the general ledger can become a single unit and have a more complete and detailed explanation.

Compilation of Balance Sheet

In preparing a trial balance, you only need to copy the balance value of each account in the ledger. Although it’s fairly easy, you need to calculate the amount of balance in the general ledger, so the process of preparing a trial balance can be easier and minimizes errors.

Make an Adjustment Journal and Post it to the Big Book

If there is a mistake in the journalizing process, you need to keep an adjusting entry. An adjustment journal also needs to be made to ensure that all costs and income have been recorded in the right period or period of time. You keep doing the recording in this adjusting journal until all errors or things you want to make sure have been revised. That way, you can record an adjustment journal without errors in the ledger.

Rearrangement in the Post Balance Trial Making Adjustment Journal

After keeping an adjusting entry, you also need to adjust the contents of the trial balance. This is because the adjusted trial balance will be used as a source of initial data for financial statement preparation activities.

Arrange the Financial Statements in Accordance with Information on the Adjusted Trial Balance

In preparing financial statements, you need to fill in several explanations such as profit and loss statements, changes in capital, and also the balance sheet. At this stage in preparing the financial statements, you must move your account information on the adjusted trial balance to the financial statements. The recording must also be adjusted to the format of the financial statements.

Making and Bookkeeping Turning Journal in the Big Book

The making and accounting phase of the reversing journal in the general ledger is the final stage in preparing the accounting cycle report and is generally done when starting a new accounting cycle period. You can also decide not to make a reversing journal if you feel it is not needed in the accounting cycle report for a certain period.

Create and Post-Closing journals in the ledger

The making of this journal relates to the closure of information of all accounts with a profit, loss statement and also a report on changes in capital. The purpose of keeping a closing journal is to avoid the risk of recalculation of the accounting cycle in the next period. That way, the closing journal ends the account of changes in capital, income, and expenses.

Make a Post-Closing Trial Balance

The purpose of making this closing trial balance is for account information to be balanced. That way, accounting activities in the next cycle can be started without any mistakes that might be fatal. The preparation of the closing trial balance is carried out by recording accounts that still have a post balance value, after making a closing journal.