sequnce of account entries??
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An accounting sequence is the order in which every business transaction is recorded in your accounting records. The underlying accounting principle in the accounting sequence, also known as the accounting cycle, is that your debits and credits must equal. The accounting sequence starts with each individual transaction and flows through to the end of the accounting period. Once an accounting period ends, the accounting sequence starts all over again.
Analyze the Transactions
The accounting sequence starts with analyzing each transaction based on the source document. Your source documents can be paper documents, such as checks, bank statements, purchase orders and invoices, or electronic documents. The source document identifies the type of transaction, such as a sale or a payment.
Journalize the Transactions
Use the information from the source documents to enter each transaction into the general journal. You enter each transaction using the principle of double-entry accounting. Double-entry accounting means that you record every transaction with a debit and a credit entry. For example, record a payment from a vendor as a debit to the cash account and a credit to accounts receivable.
Post to Subsidiary Ledgers
Once you have entered the transactions into the general journal, you are ready to post them to the subsidiary ledgers. Posting means transferring each general journal entry into an individual specialized ledger. The type of transaction determines which subsidiary ledger to use. Frequently used subsidiary ledgers are accounts receivable and accounts payable ledgers. Subsidiary ledgers support the general journal entries and provide in-depth information about each transaction.
Run an Unadjusted Trial Balance
After posting the transactions to the subsidiary ledgers, you must ensure that the debits equal the credits. To create a trial balance, list each account with its debit or credit balance. Add up the debit and credit columns and see if the total amounts are the same. If so, your accounts are in balance. If not, you must review each account to find out which one is out of balance and correct it.
Make Adjusting Entries
You make adjusting entries to bring your trial balance up to date before you run your financial statements. Adjusting entries are for your prepaid expenses and unearned revenue, accrued liabilities and receivables, and estimates. After adjusting the accounts, you run an adjusted trial balance to verify that the debits and credits are still in balance.
Create Financial Statements
Prepare financial statements once the adjusted trial balance is completed. You prepare the income statement first, followed by the balance sheet and the statement of cash flow.
Make Closing Entries
You make closing entries to close out temporary accounts such as revenue and expense accounts. Close out accounts with a debit balance with a credit entry. Close out accounts with a credit balance with a debit entry.
Prepare Post-Closing Trial Balance
Run a post-closing trial balance to verify the debits and credits are in balance. This closes the accounting sequence for the current period. You are now ready to start the accounting sequence for the next accounting period
Analyze the Transactions
The accounting sequence starts with analyzing each transaction based on the source document. Your source documents can be paper documents, such as checks, bank statements, purchase orders and invoices, or electronic documents. The source document identifies the type of transaction, such as a sale or a payment.
Journalize the Transactions
Use the information from the source documents to enter each transaction into the general journal. You enter each transaction using the principle of double-entry accounting. Double-entry accounting means that you record every transaction with a debit and a credit entry. For example, record a payment from a vendor as a debit to the cash account and a credit to accounts receivable.
Post to Subsidiary Ledgers
Once you have entered the transactions into the general journal, you are ready to post them to the subsidiary ledgers. Posting means transferring each general journal entry into an individual specialized ledger. The type of transaction determines which subsidiary ledger to use. Frequently used subsidiary ledgers are accounts receivable and accounts payable ledgers. Subsidiary ledgers support the general journal entries and provide in-depth information about each transaction.
Run an Unadjusted Trial Balance
After posting the transactions to the subsidiary ledgers, you must ensure that the debits equal the credits. To create a trial balance, list each account with its debit or credit balance. Add up the debit and credit columns and see if the total amounts are the same. If so, your accounts are in balance. If not, you must review each account to find out which one is out of balance and correct it.
Make Adjusting Entries
You make adjusting entries to bring your trial balance up to date before you run your financial statements. Adjusting entries are for your prepaid expenses and unearned revenue, accrued liabilities and receivables, and estimates. After adjusting the accounts, you run an adjusted trial balance to verify that the debits and credits are still in balance.
Create Financial Statements
Prepare financial statements once the adjusted trial balance is completed. You prepare the income statement first, followed by the balance sheet and the statement of cash flow.
Make Closing Entries
You make closing entries to close out temporary accounts such as revenue and expense accounts. Close out accounts with a debit balance with a credit entry. Close out accounts with a credit balance with a debit entry.
Prepare Post-Closing Trial Balance
Run a post-closing trial balance to verify the debits and credits are in balance. This closes the accounting sequence for the current period. You are now ready to start the accounting sequence for the next accounting period
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