Accounting is really common presents, every concern need accounting to enter down all the concern dealing. Accounting besides named as linguistic communication of concern and is sort of art of recording, sum uping and sorting. Account focal point on describing to related people inside the concern direction accounting. These groups of people provide the fiscal information to company employees, director, hearer and proprietor of the company. Accounting is to find the fiscal stableness of the organisation. The duties besides include finding a concern or an organisation ‘s overall wealth, liquidness and profitableness.
With accounting trailing and record all these information is the foundation upon the day-to-day and long-run determination could be made. For an illustration as if accounting record determine that the current company holding some sum excess budget, concern proprietor would be made a determination on the investing on the budget. The budgets for the selling activities, investing on the research development, net income reinvestment is company growing all depend on the consequence or outcome the record accounting. Accounting is one of the most needful, respected and oldest profession in the universe and accounting is needed in every industry or concern.
Accounting rules is a set of criterion for accounting and book maintaining, it standardizes and it stands for every type of concern. The standardisation and the integrity in all concern accounting processs is to guarantee the standardisation is clear and understanding no affair what types of concern is being record and proctor. One of the illustrations is the rhythm of accounting. There are system called By and large Accepted Accounting Principles ( GAAP ) are the general regulations and process that all type of concern follow when trailing and entering all the concern dealing and fiscal information. There are no jurisprudence to take action but is the advantages when the company is describing to the loan bureaus and the authorities when describing earning or acquiring an audit. Accounting rhythm is one of the of import elements in or stairss to follow when recording or shuting the history.
Accounting rhythm is including beds of accounting ; there is different type of accounting in a individual concern. Every concern has it ain alone dealing and type of accounting. But there are accounting of twenty-four hours to twenty-four hours minutess and all are of import to the concern itself. The countries include paysheet, assets, receivables, revenue enhancements payables public and recognition. Day to twenty-four hours dealing have to be recorded and called as basic book maintaining. All the dealing recorded in the basic book maintaining have to equilibrate in debit side and recognition or else there mistake or errors had been done on the inside informations on the recording ; the history has to be balance due to the regulations accounting or the accounting equation. There are all sort of study needed to find the company to success such as statement of net income and loss, assets and liabilities study, retained equity and balance sheets. All these study give an overall image of the company dealing and the company way to the proprietor. All these study will be aid to make up one’s mind the company fiscal status and the will be affect on the accommodation to be made in the company strategies for operation. These studies will assist to pull investor if the company fiscal status shows stable and all these study are included and one of the measure of accounting rhythms.
2.0 Accounting Cycles
The accounting rhythm it begin with making the chart of history for the concern and coating with shuting the book for the concern at terminal of the accounting period. The accounting rhythm is the series of stairss have to be taken due to the expired of the accounting clip period of it fiscal minutess. There are Numberss of measure to be complete during the accounting period to hive away, record and describe the accounting information contained in the recorded dealing. There are major 8 stairss in accounting rhythm:
1. Develop the Chart of Histories
2. The Source Document in an Accounting Transaction
3. Accounting Journal Entries
4. Construct the General Ledger
5. How to Fix a Trial Balance
6. How to Make Adjusting Entries in your Accounting Diaries
7. Fix the Financial Statements
8. Closing Entries as Part of the Accounting Cycle
2.1 Develop the chart of history.
Chart of history is a list of history recorded in the leger, puting up the company accounting and book maintaining system, the first measure should be develop a chart of history. The chart of history includes the index of all history relevant to the company file and company fiscal information. The figure of history is the supply for the company. The figure history will non be repairing and all depend on the company operation and the nature of the company operation. The figure of history have to be maintained and extent the inside informations which needed for future used, such as taxing governments audit, recognition intents, direction determination and etc. For an illustration, there difference type of wages such as executive wages, gross revenues wages and office wages but all these different types of wages will be merely record in a individual wage disbursals account. The agreement of the history in the chart of histories should be the same in the balance sheet and the income statement. There are excessively many history to be manage, the history could be represent by codification. The codification figure is given for the history itself and account of the history is given.
2.2 The Source Document in an Accounting Transaction
The physical papers is really of import, the beginning papers in a history dealing is a type of prove or grounds that dealing truly happened. Once the physical papers has received the dealing have to be recorded as a journal entry every bit shortly as possible, these will forestall the dual entry be made. There are many types of physical papers such as cheques, purchase orders, bill, memo and etc. These physical paperss have to be maintaining and proper arrange after recorded in to the diary for future mention.
2.3 Accounting Journal Entries
The diary entry in company accounting is to enter down the day-to-day dealing. Most of the diary will be recorded in the general diary. The basic diary consists of day of the month column, list of affected history by each dealing, debit column, recognition column to record as debit or recognition to each history. There advantages usage of the general diary. The diary able to assist to forestalling mistake due to the history debit and recognition sum of the dealing initial record down on the journal page as a mention. With the diary, this is easier to verify or buyoff the equality of the debit and recognition. All the dealing are recorded in one topographic point, it besides provide an overall image of the dealing itself. This will come ready to hand when during scrutinizing procedure. If there are any mistake detected in later any of the history rhythm and mention can be made to look into back all the record in general diary. The dealing in the general diary will be recorded in chronological order, it besides provide the concern fiscal dealing on twenty-four hours to twenty-four hours footing.
2.4 Construct the General Ledger
The chief accounting record of the company concern will be record at general leger. This measure will be take the concern fiscal dealing from the general accounting diary and concept so recorded in general leger in drumhead signifier. Initially dealing will be recorded by the grounds of the concern papers such as bill, cheques, paysheet and etc. By the basic of information provided by the concern papers, all the dealing will be record down in chronological order in a diary. After that all the debit and recognition will be transfer to the history in the leger. Using a two column history and poster from the diary to the leger is easy to be complete. Before do so there are several stairss have to be taken. The first measure has to be finding the plus, liability, proprietor equity or the disbursal histories are affected. Second measure is to find plus, liability, proprietor equity or the disbursal is increase or decreases the history. The 3rd measure is to find the affected dealing should be recorded as debit or as recognition in plus, gross, disbursal or liability history.
The procedure of concept and entering the in the T history have to be follow. The day of the month has to be recorded accurately and the format of the day of the month must in day of the month, month and twelvemonth. All the dealing has to enter down followed twenty-four hours by twenty-four hours. Record the debit have to infix the rubric of the history and to be debited at the utmost left of the description column, the sum enter to the debit column must be accurate. The recognition history have to infix the rubric and to e credited the below history debited, enter the sum in the recognition column.
All the dealing is recorded such as debit and recognition to the specific history. The rubric used in the entries should be the same as the history in the leger. All the history have to equilibrate before move to the following measure and no occupation is complete if the history ‘s Numberss that becomes imperative.
2.5 How to Fix a Trial Balance
After complete the general leger history for the accounting rhythm, the following measure is to fix the test balance. Trial balance is the manner to numbering all the debit and recognition for the leger to do certain that all the histories are balance for the specific accounting period. First have to equilibrate each of ledger history separately and reassign all the related history to the test balance format. Trial balance will non supply a complete truth cogent evidence of the leger, but it able to bespeak the debit and recognition all are equal. There are mistakes will be often affect the equality of the debit and recognition. When test balance is non equal, usually due to following mistake is made.
1 ) Mistake in fixing the trail balance such as incorrect sum or history insert in the test balance
2 ) Mistake in finding the history balances such as incorrect balance key in when fixing the leger.
3 ) Mistake in recoding the dealing of the leger such as debit or a recognition poster was wholly omitted.
But there are some of the mistake will non do the test balance ‘s entire inequality such as:
Failure to post a dealing
Record the same error of sum in debit and recognition portion of the dealing
Record the same debit and recognition dealing more than one time.
Posting the dealing debit and recognition with day of the month and sum right but incorrect history were declare.
The truth of the history balance and describing them on the test balance will be aid to find and is rather obvious. All the being mistake can be prevent and detected in several ways such as:
By audit and buyoff process
Opportunity find
Through the medium of the test balance
If the sum of the debit and recognition of the test balance can non come to a understanding, which besides prove that there are error occur in the procedure of entering. The hunt of mistake much be proceed, sometime the difference of sum will be give a hint to the particular mistake where it occurred. At the terminal of the accounting period, ledger histories have to convey up to day of the month. A
A
A 2.6 How to Make Adjusting Entries in your Accounting Diaries
When comes to stop of the period of accounting accommodation entries are made in the company accounting diary. The chief intent of seting the entries is to set the disbursals and grosss to the specific accounting period.
2.7 Prepare the Financial Statements
The concluding measure in accounting rhythm is fixing all the fiscal statement. All the information and papers were recorded from the diary and general leger will be used to fix the fiscal statement such as maintained net incomes, balance sheets, and the statement overall hard currency flows. All the fiscal statements have to fix is order as reference. The information of the old statement will be prepared for the following statement.
2.8 Closing Entries as Part of the Accounting Cycle
When comes to the terminal of the accounting rhythms to shuting the entries and the diary entries have to be done. The balance of the impermanent history to will be closed and remain zero value to get down the coming accounting period. Some of the history will be near but some of the history will non. The histories that are closed are disbursals account, pulling history and gross history. The liabilities account, proprietor ‘s equity history and plus history will non be closed and the staying balance will be are the beginning balances for the coming accounting period.
2.3 Decision
Accounting rhythm is of import to the company, without the accounting rhythm counsel and process to follow, accounting will go mussy and non standardise. When semen to supervise the concern current fiscal position will be a concern to the concern proprietor. Accounting rhythms besides recorded down the overall concern rhythm dealing for future mention and monitoring.
Question 2
Assume that you are an proprietor of a rafflesia Sdn Bhd, below are TWELVE ( 12 ) information during the first month of operation for the twelvemonth 2011 for you to utilize in entering the followers:
Create one dealing for each history, and fix the necessary Journal Entries.
On 1 May, Mr Tan, proprietor of Rafflesia Sdn Bhd, invested RM200,000 hard currency and premises amounting to RM450,000.
On 2 May, recognition purchase of machine RM2000 from ABC Co.
On 5 May, hard currency RM500 wage for Insurance.
On 6 May, paid a check RM1000 to advertisement.
On 8 May, hard currency purchase RM800 on natural stuffs.
On 10 May, hard currency gross revenues RM6000.
On 12 May, purchase return RM400 to PQR Co.
On 18 May, hard currency RM10,000 wage for wage for the month.
On 19 May, paid electricity and H2O check RM100.
On 20 May, gross revenues on recognition to Ahmad RM7000.
On 25 Mat, return inwards RM500 from Ahmad.
On 30 May, backdown of hard currency RM3000.
Post to the General Ledger the above Journal entries.
Cash
May-01
Mr Tan
A
200,000
May-05
Insurance
500
10
Gross saless
6,000
8
Purchase
800
18
Salary
10,000
30
Pulling
3,000
30
B c/d
191,700
206,000
A
206,000
Jun-01
B b/d
191,700
A
Premisess
May-01
Mr Tan
A
450,000
May-30
B c/d
A
450,000
450,000
A
450,000
Jun-01
B b/d
450,000
A
A
Insurance
May-05
Cash
A
500
May-30
B c/d
A
500
500
A
500
Jun-01
B b/d
500
A
A
Bank
May-30
B c/d
A
1,100
May-06
Ad
1,000
19
Electricity & A ; Water
100
1,100
A
1,100
Jun-01
B b/d
1,100
A
PQR Co
May-12
Purchase Return
400
May-30
B c/d
A
400
400
A
400
Jun-01
B b/d
400
A
A
Salary
May-18
Cash
A
10,000
May-30
B c/d
A
10,000
10,000
A
10,000
Jun-01
B b/d
10,000
A
A
Ahmad
May-20
Gross saless
A
7,000
May-25
Gross saless Return
500
30
B c/d
6,500
7,000
A
7,000
Jun-01
B b/d
6,500
A
A
Pulling
May-30
Cash
A
3,000
May-30
B c/d
A
3,000
3,000
A
3,000
Jun-01
B b/d
3,000
A
A
Mr Tan
May-30
B c/d
A
652,000
May-01
Cash
A
200,000
1
Premisess
450,000
2
Machinery
2,000
652,000
A
652,000
Jun-01
B b/d
652,000
A
Purchase
May-08
Cash
A
800
May-30
B c/d
A
800
800
A
800
Jun-01
B b/d
800
A
A
Ad
May-06
Bank
A
1,000
May-30
B c/d
A
1,000
1,000
A
1,000
Jun-01
B b/d
1,000
A
A
Gross saless
May-30
B c/d
A
13,000
May-10
Cash
A
6,000
20
Ahmad
7,000
13,000
A
13,000
Jun-01
B b/d
13,000
A
After acquiring the balances of ( B ) , Create the Trial Balance
RafflesiaSdnBhd
Trial Balance As At 30 May 2011
Particular
A
A
A
Dr
Chromium
Cash
191,700
A
Mr Tan
652,000
Premisess
450,000
A
Purchase
800
A
Insurance
500
A
Ad
1,000
A
Bank
1,100
Gross saless
13,000
PQR Co
400
A
Purchase Return
400
Salary
10,000
A
Electricity & A ; Water
100
A
Ahmad
6,500
A
Gross saless Return
500
A
Pulling
3,000
A
Machinery
2,000
A
666,500
666,500
Finally, fix the two ( 2 ) major fiscal Statements
D.1 Income Statement
RafflesiaSdnBhd
Income Statement For Year Ended 30 May 2011
A
A
A
A
RM
RM
Gross saless
13,000
A
–
Gross saless Return
-500
A
Net Gross saless
12,500
A
–
Cost OF GOOD SOLD
A
Purchase
A
800
A
–
Purchase return
-400
-400
Gross Net income
A
12,100
A
–
Expenses
A
Insurance
500
A
Ad
1,000
A
Salary
10,000
A
Electricity & A ; Water
100
-11600
Net Net income
A
500
A
D.2 Balance Sheet
RafflesiaSdnBhd
Balance Sheet As At 30 May 2011
Fixed Assetss
RM
Premisess
450,000
Machinery
2,000
Current Assetss
Cash
191,700
PQR Co
400
Ahmad
6,500
650,600
Owner Equity
Net Net income
500
Pulling
-3,000
Liability
Mr Tan
652,000
Overdraft Bank
1,100
650,600