The Development of Accounting and Its Cycle.

Topics: Balance sheet, Double-entry bookkeeping system, Generally Accepted Accounting Principles Pages: 2 (717 words) Published: February 27, 2013
Accounting is a process of obtaining, recording, classifying, summarizing, reporting, interpreting and presenting financial information or communicating the results of the transactions to users to facilitate making financial decisions. Accounting often uses a term that defines what is happening to make the process easier to understand. For example, asset is known as the resources that owned by the company or controlled by the accounting entity for future economic value. Asset can be categorized in fixed assets which are land, property, machinery; current assets which are cash on hand or in bank, inventories, debtors. While liabilities defined as the legal bound obligation to pay debts or in short, the debts of the business. Current liabilities are accounts payable, creditors, prepayments; long-term liabilities are bank loan, bonds, mortgage and so on. While capital is the first investment of business’s owner or the profit retained for business uses. Next, accounting can be define is a two-step process which are choose the right accounts used in a transaction and determine the correct amount to be used in the transactions. Both of these steps are critical to successful recordkeeping. Besides that, accounting cycle is a methodical set of rules to ensure the accuracy and conformity of financial statements. Accounting cycle also known as ‘bookkeeping cycle’ which means practice of recording the transactions of a business and it does helps to reduce mistakes. In another words, accounting cycle refers to eight steps (which shown in a diagram below), repeated in each reporting period, verify transactions and prepare financial statements for internal and external users. Internal users like management of the company might need more information for analyze the company’s performance and position or discover problem that might occur and took appropriate measures to improve the company results or solve the problem occurred in an appropriate way. Besides, owner of the...
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