describe in detail the three phases of evolution of accounting
Answers
Explanation:
The process of going from sales to end-of-month statements has several steps, all of which must be executed correctly for the entire accounting cycle to function properly. Part of this process includes the three stages of accounting: collection, processing and reporting.
Answer:
The sequence of accounting procedures is also referred to as the accounting cycle. The process of going from sales to end-of-month statements has several steps, all of which must be executed correctly for the entire accounting cycle to function properly. Part of this process includes the three stages of accounting: collection, processing and reporting.
Explanation:
Collection Stage of Accounting
The collection stage of accounting occurs during the early stage of the accounting cycle. The first activity of the accounting process is collecting data. The ultimate goal of the accounting cycle is to prepare financial reports that show the financial status of a business. To get to that result, data regarding sales, purchases and other financial transactions during the accounting period have to be gathered. These items are sorted according to the type of account they are, and stored so they can be loaded into the accounting system and recorded at a later date. For example, daily sales totals, office supply purchases made with cash and equipment purchased with a company credit card are transactions that need to be recorded into the accounting system, so they will be stored as sales, purchases and accounts payable, respectively.
Processing Stage of Accounting
The processing stage of the financial accounting cycle is the stage when things are recorded in the accounting system. General journal entries for business transactions are entered, and then those amounts are transferred to the general ledger. So, if a business had cash sales of $350, the journal entry would include a debit to Cash and a credit to Sales, with general ledger entries to update each account. If the business paid off a vendor account, the general journal entry would include a debit to the accounts payable vendor account and a credit to cash, and those ledger accounts would also be updated. Once all the accounting transactions have been recorded into the general journal and general ledger accounts, the ledgers are totaled and the unadjusted trial balance is created.
Reporting Stage of Accounting
Financial reporting starts the end of the accounting cycle. It is during this stage that the financial reports a business uses the most – the Income Statement, Balance Sheet and Statement of Owner's Equity – are completed. All required general journal entries have been completed, and the general ledger accounts have been tallied, adjusted and closed out. These numbers are then placed on their respective financial statements. The Income Statement reports the total income and expenses of the business for the designated accounting period. It also shows whether the business showed a profit or a loss. The Balance Sheet is a snapshot of the business's other account activity and an inventory of assets. The Statement of Owner's Equity shows how much the business owners have tied up in the business and a valuation of the business at that particular time period. These statements are done monthly, but quarterly and annual statements are also computed