The accounting process It is the cycle that occurs between the occurrence, registration and processing of financial operations carried out in a company. That is, it is a sequence of activities that leads to the detailed record of how goods and services are received, charged and paid for in an organization.
This record is made in the accounting books or notebooks. It is a process that occurs in stages and that is constantly restarted. It compiles financial information that is then presented in the form of reports called financial statements..
But the cycle does not end until the presentation of those financial statements, but starts over from there. The frequency of financial reports depends on the nature or size of the business. However, the normal thing is that they are quarterly, semi-annual and annually.
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Among the stages of the accounting process are:
The type of operation that is being carried out is defined through the source documents: invoices, purchase orders, contracts, etc. These source documents should be original, since they serve as support for the recorded transactions..
Those transactions must be analyzed before being loaded into the system to determine the account to which they belong and the actual amount to be recorded. Only accounting transactions that belong to the company are entered.
In the accounting database or accounting system that a company uses, there is a list of accounts or concepts in which the entries will be included.
It is important that these accounts are properly detailed and specific enough to clearly reflect the nature of the transaction..
At this time it is decided which will be the accounts in which the transaction will be registered.
The transaction or journal entry is noted as it occurs, resulting in chronological order. To make these annotations, the double entry accounting system is generally used, in which the debited accounts and the credited accounts are reflected..
There are special books in which transactions that are repeated with a certain frequency are recorded..
Entries or transactions are posted to individual ledger accounts, with debits on the left and credits on the right.
Each account is detailed in the ledger.
It is the preliminary balance of all the accounts; balances are calculated and debit and credit balances are totaled.
If the result at the end of these two columns is the same, then the balance is correct.
It is the entry of the totalization of profits and losses of the business.
After determining the account balances that are reflected in the general ledger, we proceed to verify the accuracy of the records.
With this document, the effects of the adjustments can be relocated, before recording them in the accounts.
At this time the adjustments are noted in the journal, based on the data collected in the trial balance..
Once this step is completed, these adjustments are passed to the general ledger. In this way, the accounts will show correct and updated balances.
The amounts in the various registered accounts are combined and presented in financial statements..
That is, the information from the worksheet (or trial balance) is regrouped, and the following are prepared: the general balance sheet, the income statement, the cash flow statement, etc..
In this phase, actions are carried out that allow closing the accounting cycle in a given financial year.
Among the operations that are executed in this phase are:
At the closing, the fiscal year is closed on the books to serve as support for the next fiscal year. At this stage, journal entries are posted to close temporary capital accounts.
This information then goes to the general ledger, where the profit and net loss go to the capital account. It is the record of the end of the year, in which all accounts (creditors and debtors), must have a null balance.
It is a step after the closing of the nominal accounts. It is a procedure that ensures that the general ledger is balanced for the beginning of the next accounting period.
It is a balance sheet that has Assets, Liabilities and Capital.
The final balance sheet is the process involved in bringing the accounts to the general ledger. In the asset column, the credit accounts are placed and in the liabilities column, the debit accounts..
This will be the balance that will be taken into account to make the initial balance sheet for the following financial year.
The accounting process is the only reliable way to determine the profitability of a company. Only by following these steps will you be able to see the detail of the profitability of the investment that is being made in a certain business.
Likewise, it is what will allow having data to make correct decisions about the operation of the business, such as which items need capital injection or which should be discarded.
On the other hand, it also has legal advantages, due to the fact that it allows to have up-to-date information that may be required by government entities..
Over the years, most tasks in a company have been affected by automation in different ways. In the case of accounting, something very different does not happen.
When computing became a popular activity, around 1981, accounting information systems were integrated into databases.
According to the size and nature of the company, its leaders decide the level of systematization they will use in their accounting.
Some of the advantages of automating the accounting process are:
Most of the software on the market are designed so that the accounting team can easily and quickly adapt to the system..
In addition, they include quick ways to correct probable mistakes that may be made..
It is one of the most obvious benefits of an automated system because it allows you to locate entries, accounts or any other accounting data, in a matter of seconds.
This also comes with a burden of convenience, since it eliminates the need to lug around with ledgers or folders..
Accounting automation allows having, when required, the financial picture of the business.
Likewise, the behavior of each account can be checked and contrasted at any time of the financial year..
Having the automated accounting system allows you to have copies of all the information faster and easier than having it manually would mean.
Like everything, this automation also involves certain risks, among which we can mention:
Computer viruses are a risk to any electronic device or system.
Accounting systems are also susceptible to being penetrated by a virus, making it mandatory to protect them with strong security measures.
This fact reaffirms the enormous advantage of having backup copies and backup.
The theft of information through the actions of hackers is another natural risk of these systems.
Some IT tools to carry out the accounting process can be:
It is a package with applications to keep accounting: treasury, payroll, tax returns, etc..
It is a software created by the company PSL that allows the administration of accounting, inventories, sales, customers, suppliers and their invoicing, all this supported in the cloud.
So you can have access to information from anywhere at any time.
It is a software that allows you to pass the information from the books to an Excel sheet.
It is a software that allows meticulous inventory control, so it is useful for companies with warehouses.
It also enables the registration of sales and purchases.
It is a software very similar to Secop, although with a simpler interface.
It is a software that allows you to control orders with a high level of detail.
There are more specific softwares such as Prestacob, which allows you to make loans, or Factool, to register, print and consult the invoices issued by a company.
As seen, it is a key process within business management that has evolved over time and can be as sophisticated and complex as required by the size and nature of the organization..
The accounting process is a way of ensuring the proper functioning of a business and its stages and modes are adapted to the organization.
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