P1 the Purpose of Accounting Essay example

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P1 Describe the purpose of accounting for an organisation What is accounting Accounting is a recording, reporting, and analysis of financial transactions of the business. The person which is in charge or accounting is known as an accountant, this person is specifically in charge to follow rules and regulations, such as the generally accepted accounting principle. Accounting lets businesses to analyze the financial performance of the business, and look for statics such as net profit. The accounting process The accounting process is a chain of activities that begins with an operation and ends with the closing of the books. Because this procedure is repeated every reporting phase, it is referred to as the accounting…show more content…
There are two major types of adjusting entries which are: Accruals Accruals objects are individuals for which the firm has been realizing revenue or expense without yet observing an actual transaction that would consequence in a journal entry. Some accrued objects for which adjusting entries may be made include: • Salaries • Past-due expenses • Income tax expense • Interest income • Unbilled revenue Deferrals Deferred things are those for which the firm has recorded the transaction as a journal entry, but has not yet realized the revenue or expense associated with that journal entry. In previous expression, the acknowledgment of deferred items is postponed until a later accounting period. 9. Position adjusting entries to the ledger accounts 10. Arrange the adjusted trail balance. This stage is similar to the planning of the unadjusted trial balance, but this time the adjusting entries are included. Correct any errors that may be found. 11. Prepare the financial statements. • Trading, profit and loss account: prepared from the revenue, expenses, gains, and losses. • Balance sheet: prepared from the assets, liabilities, and equity accounts. • Statement of reserved earnings: prepared from net income and dividend information. • Cash flow statement: resulting from the other financial statements using either the direct or indirect method. 12. Prepare closing journal entries that near temporary accounts
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