Every business small, medium or large uses an accounting cycle to collect and process transactions from events to prepare financial statements to interested parties. The accounting cycle consist of eight steps (1) analyzing transactions and other events, (2) journalizing, (3) posting; (4) preparing trail balance, (5) adjusting entries, (6) preparing adjusting trial balance; (7) preparing financial statements; and (8) closing process (Kieso, Weygandt, & Warfield, 2007, p. 93). For easier understanding, this paper I will explore a small auto repair business, Absolute Autowerks that I work for to explain the accounting process, including the people, processes, and the systems integrated into the cycle.
Analyze Transactions and Other Events
Step one, of the accounting cycle is to analyze transactions and source documents from selected events, such as sales invoices, utility bills, or other source documents. Source documents confirm that a transaction has occurred and establish an amount for recording. For example: parts purchased from supplies used to repair the cars (the event) that calls for the transaction, or the utilities bill that is an expense to operate the business.
Step two, of the accounting cycle is to record the results of the transactions in a journal also known as “books of original entry” (Kieso, Weygandt, & Warfield, 2007, p. 69). Journals provide in sequence records of all business transactions, which include the dates, amounts, and the particular accounts it affected by the transaction. The company uses two different software systems that track these transactions. The first software system, All Data used by the manager records transaction that relate directly to the repair of the cars, these transactions are the parts and labor to create the invoice for customer. After, the car repairs get completed and all parts and labor recorded in to system the customers invoice gets generated. The customer pays for... [continues]
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