The accounting cycle is a step by step process that companies choose for themselves during each accounting period, it is done in order to manage their overall financial transactions. To follow and work on the accounting cycle, you must start by forming and setting up your accounting system for the specific period. It is only at the end of the accounting cycle, that you'll be prepared and ready to close your books for the period and prepare for the next accounting period.
When you begin a small business, develop a chart of accounts as an element of establishing your accounting and bookkeeping system. The chart of accounts is an index of all the accounts where the company files its fiscal information. Small business accounting has tons of procedures to carry out.
The Source Record in an Accounting Transaction
A source record in an accounting transaction is evidence that the transaction has taken place. It needs to be as a journal entry as soon as possible. Examples are canceled checks, invoices, purchase requests, and other business documents.
Accounting Log Entries
When a small company creates a financial transaction, they make a log entry in their accounting journal in order to record the transaction. If you are using dual entry bookkeeping, you will make two entries: a debit as well as a credit to the appropriate accounts. It is crucial to keep the log entries up to date whether it is for small business accounting or any other business accounting.
Construct the General Ledger for your Small Business
The general ledger is actually the primary accounting report for your enterprise. All of the business's financial transactions are taken from the general bookkeeping journal and documented inside the general ledger in a summary form.
How to Develop a Trial Balance
After you have completed your general ledger entries related to an accounting cycle, the very next step is the one to prepare a trial balance. A trial balance is the one that is obtained from the process of finalizing and totaling the absolute debits and credits from the general ledger to make sure they balance for the accounting period in question.
How to Make Adjusting Entries in your Accounting Journals
Adjust the entries that are made into your accounting journals along the end of your accounting period. The main purpose of adjusting the entries is to adjust the overall revenues and also the related expenses that occur during the accounting period in which they actually occurred. There are five major types of entries: accrued revenues, accrued expenses, prepaid expenses, and depreciation. All of the mentioned above have a significant impact on overall monthly balance. Outsourced accounting service is the one that helps businesses’ handle the overall accounting task with ease.
Prepare the Business’s Financial Statements
The information that is acquired from the accounting journal as well as the one acquired from the general ledger is then put to use to bring forth and develop the overall income statement, statement of the retained earnings, the overall balance sheet, and a statement of cash flows.
Outsourced accounting services are the ideal arrangement and option for budding businesses who wish to hand over their accounting and bookkeeping task to an expert.