ACCOUNTING CYCLE I ACCOUNTING STRUCTURE I ACCOUNTING PROCESS

Accounting Cycle: The process of identifying, recording, classifying and summarizing all business transactions is called accounting structure or accounting process or accounting cycle. The period of the accounting cycle is often one year, which is called an accounting year.
1. Journalising: Identifying and Recording is the basic function of accounting. There are certain rules to record transactions of financial nature in primary books. These primary books are known as subsidiary books. Recording of such business transactions in journal or subsidiary books is called as journalising.
2. Posting: The transactions are classified after their recording. The transactions of similar nature are grouped together and transfer in the respective accounts. This process of transfering the transactions in accounts is called as Posting.
3. Balancing: In ledger, separate accounts are opened for each item i.e. persons, assets, purchases, sales, incomes, expenses. Ascertaining the difference between the debit side and credit side of each ledger account is called as balancing.
4. Trial Balance: After balancing the accounts, a Trial Balance is prepared with the help of these balances. Trial Balance is a list of debit and credit balances of accounts.
5. Trading and Profit & Loss Account: Trading and Profit & Loss Account contain the summary of the transactions occurred during the accounting year and provides the information of net profit or loss and
6. Balance Sheet: The purpose of preparing Balance sheet is to present the business information in such a manner so that it could be useful for the owner and the other concerned parties. Balance Sheet shows the financial position of the business.
Regards
Dr. Ramesh Arya
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