Accounting

The primary purpose of accounting is to identify and record all activities that impact the organization financially. All activities, including purchases, sales, the acquisition of capital and interest earned from interest can be classified in monetary terms and posted to a specified account as an accounting record. These transactions typically are recorded in ledgers and journals and are part of the process known as the accounting cycle

Accounting process-

The first step is to analyze and record transactions in a journal.  This means that every time a transaction of financial value occurs, it must be recorded in a journal.

The next step in the accounting process is to post transactions to the ledger.  The ledger is a book containing all the accounts that a business uses.

The third step, and this one takes some time to complete, is the preparation of a trial balance with a work sheet.

The next few steps are simply a check and balance of the already entered transactions.

The final phase begins with the preparation of the financial statements. The financial statements are comprised of the income statement, the owner equity statement, the balance sheet and the statement of cash flows.  All the information contained in the financial statements is an accumulation of transactions from the journals and ledgers. 

Accounting in my personal life has only been in balancing my checkbook and making a budget for the house. To make a budget and balance a checkbook is a smaller version of what businesses do. You keep track of the debits and credit; money coming in and going out, and you keep track of how much you are spending on basic bills and other expenses. Having a budget and a balanced checkbook can help in a person see how much is being spent on bills and food, while saving a little for thing’s like a date night.

As small business owners are often part of a dynamic network of other business owners and suppliers, among others, it is likely...