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Accounting Processes - Book-keeping To Final Statements
by: samkern
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Word Count: 441
The most important lesson that every aspiring accountant learns right through his education and training is that of recording the transactions accurately and in the proper format. For there can be nothing more damaging to the credibility of the accounting process, if one could not rely on the figures thrown up.
Book-keeping is an important aspect of an accountant\'s job. Although it might seem quite mechanical, practically it is not so. In a large organization, despite standardized or mechanical data capture facilities book-keeping is the best way to exercise control.
Accountants record transactions on the basis of vouchers. A voucher is a concise slip that shows the appropriate item to be debited or credited along with full details of the supporting documents. Usually, cash and check payments are recorded through vouchers. Assume, the firm paid $20 in cash for buying office stationery. The debit voucher shows the account to be debited as Printing and Stationery or any equivalent term, the amount paid in figures and words and the details of the bill from the supplier.
For the sales and purchases transactions, entries are made in a book called the sales journal and purchases journal. The credit sales and purchases are recorded with complete details about bill number, party name, quantity and total amount. The daily totals from the journals are posted into the respective ledger accounts. Cash sales and purchases are posted directly from the cash book.
The books of prime entry are the Cash book (with columns for bank transactions), Sales journal, Purchases Journal and General Journal. The General Ledger is the book of secondary entry. Recording of transactions is complete only when they have been posted into the appropriate accounts in the General ledger. On a monthly interval, all the accounts in the ledger are totaled. Then a statement called the trial balance is extracted that lists all accounts with their respective balances. If the trial balance tallies, that is the debit balances equal credit balances, the numerical accuracy of the accounting system is established. Otherwise, we could conclude that the double entry principle has not been adopted properly.
Other statements that the book-keeper maintains are the bank reconciliation, creditors\' ledger, debtors\' ledger and fixed assets register.
From the trial balance, the statement of income and the balance sheet can be prepared. During the course of finalizing these statements, one would come across errors. The rectification entries for correcting them are passed through the General Journal. The ledger postings are made so that the correct balance can be arrived at.
About the Author
Sam Kern has also recently published an article on Delinquent Tax Returns.
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