An Organization often needs a way to keep score when conducting business operations. Accounting usually fits this need because it allows create to companies financial reports that can be compared with other companies or an industry standard. Business owners and managers also use accounting to review the efficiency of operations. This information may help owners and managers make business decisions and improve the company’s profitability.
Accounting is basically defined as the process of identifying, measuring and communicating economic information to help its users make informed judgment and decisions. It also involves recording, classifying, summarizing and interpreting financial transactions and events about economic entities in a significant manner. Accounting revolves from the recognition of accountable events, valuation of these events, journalizing them in a chronological sequence, posting them to ledgers, preparation of financial statements, to financial statement analysis. These processes are also done in accordance with established accounting rules and standards.
What is the accounting cycle?
The accounting cycle is a series of steps that are taken to process your paperwork and generate meaningful financial reports. The accounting cycle is the same for every business. But you can determine the frequency of the cycle based on your business structure (sole proprietor, S-Corp, Corporation, etc.) and reporting period requirements. A reporting period is the date range that you want to report on. Standard reporting periods include month, quarter, and year. A lot of business owners want to see how their business is doing month-to-month, so their reporting period is month. For them, the accounting cycle starts at the beginning of the month and closes at the end of the month. Businesses that choose this frequency tend to have many transactions per day or month, want to keep a close eye on revenue and expenses, and don 't want to fall behind on