accounting cycle 9 steps with examples and its diagram|bs|

accounting Cycle 

accounting cycle

Transaction:

Any dealing between two or more person or parties for the exchange of goods in the term of money.

Journal:

The word Journal Drived from the Latin word “jour” which means day or daily. When any business transaction took place then first of all it is recorded in a book, called journal. It is also called day book, original entry book, chronological entry book, Journal Proper.

Narration:

The short explanation of recorded transaction is called narration.

General journal contains five columns.

1): date:

 in this column the date of transaction is recorded.

2): particular/description:

In this column Name of accounts involved in a transaction are recorded and also the narration of recorded transaction.

3): Post Reference :

4): Debit column (Dr):

5): Credit Columns (Cr):

Ledger: the principle book of accounts in which all the similar accounts are posted in chronological manner.

Trail balance:

The statement through which the are thimatical accuracy of Posted Transactions from Journal are checked is called trail balance.

Adjusting Entries:

The Entries for record of those transaction which effect the financial statements of more than one accounting periods.

Adjusting Balance:

The Financial statement offer the completion of adjusting entries.

Income Statement:

The statement prepared by the business concerns in order to determine that either profit earned or less  suffered at the end of financial period. The preparation of income statement is compulsory by law in case of joint stock company.

Balance sheet/ statement of position:

The statement prepared by the business concerns. In which they show the financial of the entry is called balance sheet.

Closing entries:

The journal entries by which the revenue & expense account are being closed at the find of financial year.

Reversing Entries:

The entries for the transaction of previous financial period which need adjustments in current period.

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