explain the stages of accounting
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Accounting Cycle
The accounting cycle is the collection of the three stages of accounting. The entire accounting cycle process takes place over the period of one month. The same accounting process is repeated in its entirety each month. In order, the stages of accounting are data collection, data processing and reporting.
Data Collection
Collecting and analyzing data is the first stage of the accounting cycle. Throughout the month, various business transactions occur that must be collected in your accounting software. Typical transactions that a business may have include sales receipts, customer returns, purchase orders for inventory, payroll and bank deposits. Each financial transaction must be noted in the accounting software for the business.
Data Processing
As financial transactions are entered by the accounting department, they must be processed. This includes making journal entries so that your accounts balance. For every transaction entry there must be a balancing entry, which are usually referred to as simply debits and credits. For example, if you pay an invoice the entry is listed under accounts payable and the balancing entry may be listed under cash to show that cash was taken out to pay the invoice. As the data is collected and processed, a trial balance is run on the accounting software to make sure all of the accounts balance. This is usually done before the month's end to confirm that things are running smoothly in the accounting department. If the accounts do not balance, this results in the need for adjustment entries.
Reporting
At the end of the month, the data collection and processing comes to a close, to make way for financial reporting. Using the data that was collected and processed, the accounting department creates financial statements for the month. Financial statements include the balance sheet and income statement. These financial reports are only created once a trial balance shows that all accounts balance for the month. When the financial reports are created, it closes the books for the month so that the accounting department can start fresh for the next month. The closing balance then becomes the opening balance for the next month.
The accounting cycle is the collection of the three stages of accounting. The entire accounting cycle process takes place over the period of one month. The same accounting process is repeated in its entirety each month. In order, the stages of accounting are data collection, data processing and reporting.
Data Collection
Collecting and analyzing data is the first stage of the accounting cycle. Throughout the month, various business transactions occur that must be collected in your accounting software. Typical transactions that a business may have include sales receipts, customer returns, purchase orders for inventory, payroll and bank deposits. Each financial transaction must be noted in the accounting software for the business.
Data Processing
As financial transactions are entered by the accounting department, they must be processed. This includes making journal entries so that your accounts balance. For every transaction entry there must be a balancing entry, which are usually referred to as simply debits and credits. For example, if you pay an invoice the entry is listed under accounts payable and the balancing entry may be listed under cash to show that cash was taken out to pay the invoice. As the data is collected and processed, a trial balance is run on the accounting software to make sure all of the accounts balance. This is usually done before the month's end to confirm that things are running smoothly in the accounting department. If the accounts do not balance, this results in the need for adjustment entries.
Reporting
At the end of the month, the data collection and processing comes to a close, to make way for financial reporting. Using the data that was collected and processed, the accounting department creates financial statements for the month. Financial statements include the balance sheet and income statement. These financial reports are only created once a trial balance shows that all accounts balance for the month. When the financial reports are created, it closes the books for the month so that the accounting department can start fresh for the next month. The closing balance then becomes the opening balance for the next month.
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three types of stage account ing
Regardless of the size of a business, the same accounting process takes place. While timing may be slightly different, such as starting the month on the 1st or the 15th, all business record and process financial transactions with the same basic blueprint. This blueprint makes up the three stages of accounting.
Accounting Cycle
The accounting cycle is the collection of the three stages of accounting. The entire accounting cycle process takes place over the period of one month. The same accounting process is repeated in its entirety each month. In order, the stages of accounting are data collection, data processing and reporting.
Data Collection
Collecting and analyzing data is the first stage of the accounting cycle. Throughout the month, various business transactions occur that must be collected in your accounting software. Typical transactions that a business may have include sales receipts, customer returns, purchase orders for inventory, payroll and bank deposits. Each financial transaction must be noted in the accounting software for the business.
Data Processing
As financial transactions are entered by the accounting department, they must be processed. This includes making journal entries so that your accounts balance. For every transaction entry there must be a balancing entry, which are usually referred to as simply debits and credits. For example, if you pay an invoice the entry is listed under accounts payable and the balancing entry may be listed under cash to show that cash was taken out to pay the invoice. As the data is collected and processed, a trial balance is run on the accounting software to make sure all of the accounts balance. This is usually done before the month's end to confirm that things are running smoothly in the accounting department. If the accounts do not balance, this results in the need for adjustment entries.
Reporting
At the end of the month, the data collection and processing comes to a close, to make way for financial reporting. Using the data that was collected and processed, the accounting department creates financial statements for the month. Financial statements include the balance sheet and income statement. These financial reports are only created once a trial balance shows that all accounts balance for the month. When the financial reports are created, it closes the books for the month so that the accounting department can start fresh for the next month. The closing balance then becomes the opening balance for the next month.
Regardless of the size of a business, the same accounting process takes place. While timing may be slightly different, such as starting the month on the 1st or the 15th, all business record and process financial transactions with the same basic blueprint. This blueprint makes up the three stages of accounting.
Accounting Cycle
The accounting cycle is the collection of the three stages of accounting. The entire accounting cycle process takes place over the period of one month. The same accounting process is repeated in its entirety each month. In order, the stages of accounting are data collection, data processing and reporting.
Data Collection
Collecting and analyzing data is the first stage of the accounting cycle. Throughout the month, various business transactions occur that must be collected in your accounting software. Typical transactions that a business may have include sales receipts, customer returns, purchase orders for inventory, payroll and bank deposits. Each financial transaction must be noted in the accounting software for the business.
Data Processing
As financial transactions are entered by the accounting department, they must be processed. This includes making journal entries so that your accounts balance. For every transaction entry there must be a balancing entry, which are usually referred to as simply debits and credits. For example, if you pay an invoice the entry is listed under accounts payable and the balancing entry may be listed under cash to show that cash was taken out to pay the invoice. As the data is collected and processed, a trial balance is run on the accounting software to make sure all of the accounts balance. This is usually done before the month's end to confirm that things are running smoothly in the accounting department. If the accounts do not balance, this results in the need for adjustment entries.
Reporting
At the end of the month, the data collection and processing comes to a close, to make way for financial reporting. Using the data that was collected and processed, the accounting department creates financial statements for the month. Financial statements include the balance sheet and income statement. These financial reports are only created once a trial balance shows that all accounts balance for the month. When the financial reports are created, it closes the books for the month so that the accounting department can start fresh for the next month. The closing balance then becomes the opening balance for the next month.
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