Advantages of Accounting & Accounting Cycle

Accounting helps in keeping the complete and organized record of its financial transactions. The financial records in the books of account have reduced the human limitation of keeping everything in mind because every transaction is recorded and analyzed.

1. Advantages of Accounting & Accounting Cycle

2. What is Accounting? Accounting is the broad and organized way of recording financial transactions that pertain to business. It is a process of summarizing and evaluating transactions to report it to organizations and tax collection bodies. It is a major function for every business which is handled in small organizations by either accountant or bookkeeper and for big organizations, a proper finance department maintains the accounting procedures. The basic accounting features can be easily handled by the bookkeeper or a fresh accountant. However, for complex accounting functions, a qualified accountant with some professional degree is required to handle the matters.

3. Advantages of Accounting: Some of the key advantages of accounting are as follows :

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5. Valuation of the business : Accounting helps in providing the true and fair picture of the business. The balance sheet depicts the correct picture by showing the values of assets and liabilities that can be used to identify the net worth of the business.

6. Complete and systematic record: Accounting helps in keeping the complete and organized record of its financial transactions. The financial records in the books of account have reduced the human limitation of keeping everything in mind because every transaction is recorded and analyzed.

7. Compliance of Law: Accounting helps in preparing and filing tax returns that are maintained by every business for government bodies like sales tax, income tax etc.

8. Determination of Selling price: Accounting helps an organization in taking management decisions in order to make investments or determining cost or selling price, etc.

9. Accounting cycle: It is a process of recording and procession the accounting events of an organization.

10. Accounting Cycle Process It starts with the occurrence of a transaction and ends with its inclusion in the financial statements. it also includes additional accounting records like general ledger and trial balance. The accounting cycle is a systematic set of rules to ensure the precision and conformity of financial statements. Its standard process helps in reducing the mathematical errors in the accounting process. The best accounting software UK include s the accounting cycle. The modules are defined in these software's to enter the transaction like accounts payable and receivable etc.

11. The accounting cycle has the following steps The accounting cycle has the following steps: Analyzing accounting transactions on their occurrence Recording journal entries Posting debit and credit entries in general ledger i.e. ledger accounts Unadjusted trial balance Adjusting entries Adjusted trial balance Financial statement Closing entries Post closing trial balance.

12. ORGANIZATIONS’ ACCOUNTING CYCLE The organizations’ accounting cycle starts with analyzing and recording the accounting transactions using the journal entries. The entries are then recorded in the general ledger and then an unadjusted trial balance is maintained. The purpose of the trial balance is to ensure all debits are equal to the credits in the financial records. At the end of the accounting period, adjusting entries is made if required. The adjusting entries are made for any sort of correction required for the passage of time . After making adjusting entries, the adjusted trial balance is prepared which follows a financial statement. The end of the accounting period, the temporary accounts are closed using the closing entries like revenues and expenses. Finally, post- closing trial balance is prepared to ensure that all debits and credits are matched.

13. The accounting cycle is started and finalized within an accounting period. Most of the companies are now using accounting software's that process the most of the accounting steps simultaneously. These software's reduces the time and work of an accountant. These software's minimize the steps of recording transactions. The accuracy of these software's reduces the need of maintaining sheets of unadjusted trial balance, adjusting entries and adjusted trial balance. The adjusting entries are only required to be put into these software's which lead to the financial statement straight. The additional adjustments can also be made then and the revised report can be obtained immediately.

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