The accounting cycle is several steps implemented during an accounting period. This process is implemented to manage company financial transactions.
The 1st step is to set up an accounting system. At the end of an accounting cycle, the books are now ready to be closed. Developing a chart of accounts is part of setting up an accounting system. This is where the company files its financial data. This source document in any account is the proof that a transaction has taken place, and it should be recorded as an entry quickly. Examples of this include purchase orders, invoices, and canceled checks. An entry is made to create a formal record. When you use dual accounting, two entries are made. A debit and a credit are entered for the transaction. A general ledger should also be constructed for a small business. This is the primary accounting record.
The next step is to prepare a trial balance. This is accomplished by totaling all credits and debits from the period in which they occurred. Adjusting entries include things like depreciation, accrued revenues, prepaid expenses, and accrued expenses. All of these items have an impact on the monthly balance.
Preparing the financial statements is the last step of the accounting cycle. All of this information from the ledger and the accounting journals are used to develop an income statement, A statement of cash flow, and a statement of retained earnings.
Closing entries are also a part of the accounting cycle. Closing entries come at the end of the accounting cycle. They are used to establish a balance of temporary accounts for the next statement. These include liabilities and expenses.
Developing and preparing one's accounting system is complex. It is also time-consuming and a huge undertaking for any business, especially a small business. It's always wise to either use a CPA or outsource an accounting services company, like AccountingDepartment.com. Don't be afraid of the expense either. Outsource accounting firms offer many packages that you can choose from. You should be able to find a package that meets your budget and company goals.
Having a good accounting system in place is the lifeblood of your business. With good records in place, you'll be able to make more sound business decisions.
An outsourced accounting firm will be able to adapt to your company's unique accounting needs. You will have much more time to focus on your business. The burden of keeping the books will be eliminated from your daily tasks. Let an outsourced accounting firm streamline the process for you. They have a lot of expertise and top-notch software technology. With the help of an outsourced accounting firm, you have much more time to focus on the revenue-generating aspects of your company. In addition, an outsourced accounting firm will assist you in reducing your tax liabilities. It doesn't get any better than that.
It cannot be understated how important it is for a company to have accurate and detailed financial records, and the accounting cycle is a big part of it all for any small business. The bottom line for any business is to generate revenue and make a profit. With a good accounting system in place, your business will be on its way to success.
