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ACCOUNTING PROCESS AND ACCOUNTING BOOKS - Coggle Diagram
ACCOUNTING PROCESS AND ACCOUNTING BOOKS
ACCOUNTING
Definition
Process of identifying, measuring, recording, classifying, summarizing, analyzing, interpreting and communicating the financial transactions and events by suitable accounts
Function
To record the financial transactions
Provide understandable information to external and internal users
Product of accounting
Financial statement
Balance Sheet
Income Statement
Cash Flow Statement
Statement of Shareholders' equity
Accounting principle
Historical cost
Matching principle
Accrual basis
Materiality principle
Going concern
Consistency
Prudence
JOURNAL ENTRIES
Single entry system
Single entry bookeeping
A simple and straightforward method of bookkeeping in which each transaction is recorded as a single-entry in a journal.
Cash-based bookkeeping method that tracks incoming and outgoing cash in a journal.
Double entry system
Double entry bookeeping
Every accounting transaction has a dual effect on both the debit and credit sides of an accounting account.
Total Debit must equal total Credit
Double Entry System: the system which recognizes and records both aspects of transactions
Advantages
More accuracy
Simplify tax and audit operations
Easily check and correct errors
Prepare financial statement
ACCOUNTS
Classification
Personal accounts: are related to persons
Real accounts: related to assets or properties
Assets
Liability
Equity
Nominal accounts: related to income or gains and expenses or losses
Revenue
Expense
Accounting process
Identify financial transaction
Record in a journal. Choose between accrual and cash basis
Post transactions to genral ledger
Determine unadjusted trial balance
Generate financial statements
Close the book