The Accounting Process

Accounting Equation

 According to Practice Eye accountant experts following is the accounting equation:

Assets = Liabilities + Owners’ equity

This equation must be in balance at all times. Therefore, if one element in the equation changes, some other elements must also change to maintain the balance. Thus, at least two accounts are affected by every transaction. The term double entry in double entry accounting reflects the requirement that each transaction be recorded in at least two accounts.

For instance, if area is acquired, one resource account (Land) has expanded. To guarantee that the bookkeeping condition is in equalization, no less than one other record must change. On the off chance that the area was acquired with money, an advantage account (Cash) must diminishing by the same sum as the expansion in the area account. On the off chance that the area was acquired with a marked note, an obligation account increments to guarantee that the bookkeeping condition stays in equalization. (Imagine a scenario in which the area was acquired by an incomplete installment of money with a note for the rest of. At that point two records other than Land are influenced: Cash declines and Notes Payable increments. Together, these progressions must kill the impact of the expansion in the Land account.)

Journal and Ledger

The JOURNAL is a book in which exchanges are recorded in the request that they happen. Every exchange is recorded in the diary subsequent to being broke down to figure out which accounts it influences, the measure of the impact, and whether the exchange increments or reductions these records.

After the exchange has been recorded in the diary, it is presented on the LEDGER. The general record is utilized to record the effect of exchanges on records by recording the expansions and reductions to every record into segments. These sections frame the state of the letter "T." Thus, accounts in the general record are likewise alluded to as T-records. One T-record is utilized for every record as a part of the bookkeeping books.

Both the general diary and the general record contain data about records and the sum by which these records are charged or credited. They vary however in the way data is sorted out. In the general record, the data is composed by record. Subsequently, bookkeepers utilize the general record to ascertain equalization in various records.

Debits and Credits

The column on the left side of the T-account is called the DEBIT side. The column on the right side is called the CREDIT side. The side used for recording increases is based on the accounting equation:

                                  Assets= Liabilities + Owners' equity

Assets are on the left side of the equation.  Correspondingly, increases in assets are recorded in the column on the left (the debit) side. 

For instance, when a firm gathers money, the money parity expands; this is recorded by posting a passage on the left-hand side of the Cash account; that is, the Cash record is charged for expansions in the money equalization. Alternately, when money is paid, the money equalization diminishes; this is recorded by a passage on the inverse, or right-hand side, of the Cash account; that is, the Cash record is credited for abatement.

Liabilities and proprietors' value show up on the right half of the bookkeeping condition. Thus, increments in liabilities and proprietors' value are recorded on the privilege (the credit) side.

For instance, accept that stock was acquired using a loan. An advantage (called stock) expands, so the Inventory record is charged. Be that as it may, this buy has not yet been paid for, so an obligation exists. Creditor liabilities, an obligation, has expanded. This is recorded by posting a passage on the right-hand side of the Accounts payable record. Then again, when the supplier is paid later, the obligation diminishes. This is recorded by a passage on the inverse side (that is, the Accounts Payable record is charged when the supplier is paid, diminishing the risk).

Proprietors' value is expanded when the business procures income. We additionally realize that proprietors' value is credited for expansions. In this manner, incomes are recorded by crediting the proper income accounts.

Proprietors' value is diminished when the business brings about a cost. Proprietors' value is charged for reductions. Therefore, costs are recorded by charging the proper cost accounts.

Profits (or, on account of a sole proprietorship, drawings) are not costs; they are essentially an arrival of money to the shareholders (proprietors). In this way, profits likewise have the impact of diminishing proprietors' value. Henceforth, profits are recorded by charging the Dividends account.

Normal Balances

Resources are expanded by charges. Along these lines, the typical equalization in resource records is a charge parity. The Cash record is charged when money is gotten, and is credited when money is paid. A credit equalization in the Cash account infers that the association has a negative measure of money, which is unrealistic. In this manner, we expect a charge equalization in the Cash account.

Liabilities are expanded by credits. At the point when sums owed to loan bosses or suppliers build, an obligation record is credited. At the point when an installment is made to loan bosses (suppliers), the risk is charged. In this manner, the ordinary parity in an obligation record is a credit parity.

Proprietors' value is expanded by credits. Organizations record direct proprietor speculations utilizing the Capital Stock record. Since direct proprietor speculations build proprietors' value, the Capital Stock record is credited. Consequently, Capital Stock record has a credit equalization.

Conveyances to proprietors are recorded in the Dividends account. At the point when profits are announced, proprietors' value in the business diminishes and the Dividends record is charged.

Typically, the Retained Earnings account has a credit equalization. In any case, if a business has had misfortunes, the Retained Earnings record can have a charge equalization.

(Note that on account of a sole proprietorship, an Owners' Equity record is credited to record proprietor ventures. Consequently, the ordinary equalization in the Capital record is a credit parity. At the point when a sole proprietor pulls back cash, the Drawings record is charged since withdrawals lessen proprietor's value. Subsequently, the ordinary equalization in the Drawings record is a charge parity.)

Incomes expand proprietors' value. An income record is credited to demonstrate this increment in proprietors' value. Consequently, income accounts regularly have a credit equalization.

Costs decline proprietors' value. A cost record is charged to record this reduction in proprietors' value. Accordingly, cost accounts ordinarily have a charge equalization.

Account Reconciliations

What are Account Reconciliations?

Account Reconciliations are utilized by accountants to ensure account balances are correct between accounts during the end of a particular accounting period.

Accountants perform account reconciliation by using the following steps:

• Comparing of account balances between various independent systems
• Verifying statements and reports for accuracy and investigate discrepancies when identified
• Taking action to correct these identified discrepancies.

This process is an important internal control in the financial reporting process. Public companies are required to perform this process as part of their financial close.

What is the process for Account Reconciliations?

This account reconciliation process is generally carried out after the close of a financial period. Accountants go through each account in the general ledger of accounts and verify that the balance listed is correct and accurate. This involves comparing the general ledger account balance with other independent sources of this data, such as bank and credit card statement.

When discrepancies are found, accountants investigate these discrepancies and take appropriate corrective action. This may involve making journal entries to correct balance errors. All information found, analysis performed, and actions taken are stored for audit purposes. The account reconciliation process must be completed before a company can certify the integrity of its financial information and issue financial statements.

How Does Account Reconciliation Software Work?

Account reconciliation software automates all steps in the account reconciliation process. It takes in data from all sources of financial information such as ERP systems, bank files or statements, credit card processors and merchant services, etc. It then compares account balances between these sources, and identifies any discrepancies so that they can be investigated by accounting staff. This removes the burden of manually performing this task placed on accountants, and frees them to focus on analysis of discrepancies.

Account Reconciliation Software Features Include:

• Automated review and approval workflows, with proper segregation of duties
• Reconciliation templates and checklists to standardize processes
• Integrated storage of supporting documentation for easy review and audit
• Link to applicable policies and procedures for easy reference

What Solutions Does Practice Eye Offer for Account Reconciliations?

The Practice Eye Reconciliations product is designed to streamline all aspects of the account reconciliation process. It adds both proper controls and automation to account reconciliations.

This product imports data from any source, and is compatible with all major ERP systems. Configurable validation rules allow for auto-certification of low-risk accounts. This significantly reduces the workload of accounting staff. When discrepancies do exist that require analysis, customizable templates, checklists, and integrated storage for supporting documentation ensures that reconciliation processes are standardized across the organization. Centralized dashboards and automated workflows also provide full visibility into the status of the account reconciliation process.

We product further automates processes by enabling comparisons and validation of transaction-level account data. This allows accountants to view the exact transactions that are not matching in various systems and statements, significantly reducing the time spent locating discrepancies. This is particularly useful for high-volume reconciliations, such as credit card reconciliations.

When correcting journal entries are required, the Pratice Eye  product automates this portion of the process as well.

Please see below for articles related to account reconciliation, the account reconciliation process, account reconciliation software, and account reconciliation solutions offered in the Practice Eye Finance Controls and Automation Platform.

Accounting and Bookkeeping Service

Bookkeeping and accounting are both pertinent tool in communicating the financial activity, performance and state of a business entity.

The vital role of bookkeeping and accounting in each business has increased the insist for bookkeeping and accounting job or services international Because of the high demand, it made bookkeeping and accounting as two of the most gainful and rewarding profession in the world.

If you want to enter this profitable profession and opportunity, it is a good option to learn and appreciate the concept, principles and events of both bookkeeping and accounting.

In this article, you will pick up precious learning on the distinct definition of bookkeeping and accounting, and the difference between them. You will comprehend the function and progression of both bookkeeping and accounting, what separates bookkeeping from accounting, and when bookkeeping or accounting measures is used.

Accountingand Bookkeeping Service

It is very ordinary for non-accountants to think that bookkeeping and accounting are of the same thing. Though they both engross the process of recording the financial transactions of a business, bookkeeping and accounting are two different topics.

Bookkeeping is an important part of the accounting in sequence system because it serves as the base of accounting. Bookkeeping is a division of accounting which is dependable in recording the financial transactions of the business. It is the preparatory point of the whole accounting process. The person accountable on the bookkeeping process is often referred to as bookkeeper or accounting clerk. They are the one who ensure the recording of business transactions in the book of accounts, such as journals and ledgers, in chronological manner.

Bookkeepers are accountable in conservation the wholeness and accuracy of the book of accounts. They help accountants in prepare reports, like financial statements or tax returns, by as long as summary and supporting documents of the recorded business transactions. Bookkeeping is only partial to the recording process, although in cases of small businesses, bookkeepers may also do the preparation of reports. As such, bookkeeping can be perform by non-accountants who gained appropriate trainings and experience in bookkeeping.

Accounting, on the other give represent the complete accounting process, from footage until interpreting business financial information. Accounting is one of the most diversify professions because professional accountants have diverse options in which area of accounting they want to focus their career – such as financial accounting, managerial accounting, tax accounting, auditing, etc.