What are the types of business transactions in accounting?

Answer 1

~Vivek Kumar Ambastha The Accounting Cycle The accounting cycle consists of the many steps the accounting staff follows, beginning with analyzing transaction and ending with preparing a post-closing trial balance. When the accountant analyzes source documents to determine how to record the business transaction. Thus, the basic input of the accounting cycle consists of the various source documents, including sales invoices, purchase invoices, and time cards for hourly employees. The output from the accounting cycle consists of the financial statements. The three basic financial statements are the income statement, the balance sheet and the statement of owner's equity. Adjusted Trial Balance Adjustments are recorded in the general journal at the end of each accounting period, generally as of the last date of the month. The recorded amounts are then posted to the general ledger account as of the last day of the accounting period. After posting the adjustments, the accountant prepares an adjusted trial balance to prove the equality of debits and credits. Preparation of Financial Statements The adjusted trial balance is used to prepare the income statement and the balance sheet. The revenue accounts make up the revenue of the hospitality enterprise, while the expense account make up the expenses of the business. The difference between the revenues and expenses is either net income or net loss. Net income results when revenues exceed expenses, while a net loss results when expenses exceed revenues. Closing Entries In closing entries the revenue and expense accounts are nominal accounts, since they are sub classification of owner's equity. Accountants separate revenue and expense account to get more detailed information for use in preparing the financial statements. Once the financial statements are prepared, the accountant closes the revenue and expense account, clearing the accounts to zero by transferring the balances to the owner's equity capital account. The accountant closes these accounts with closing entries that must be recorded in the general journal and then posted to the general ledger accounts. There are three basic steps are involved in closing process, they are * Close the revenue and expense accounts to the income summary account. * Close the income summary account to the owner's equity account. * Close the owner's drawing accounts to the owner's equity account. Post-Closing Trial Balance After the accountant records and posts the closing entries, the only accounts with balances that remain in the general ledger are the balance sheet accounts. These accounts must be in balance; that is, the total of debit balance accounts must equal the total of credit balance accounts. To test this equality and to check the accuracy of the closing process, the accountant prepares a post-closing trial balance. As with the trial balance prepared before the closing process, account balances are listed in debit and credit columns and totaled to ensure that debits equal credits.