Name: The Accounting Process
Uploaded: 2022-02-17
Duration: 2 min 12 s
Description: To record & report the financial information, we follow the accounting process.

[Audio] To record & report the financial information, we follow the accounting process. 

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[Audio] . Accounting process has 4 stages. Source Documents, recording, reporting, and advice.. 

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The accounting process
Source
Recording
documents
Reporting
Advice

[Audio] A financial transaction is an agreement between two parties which needs to be evidenced by Source document. Source document provides the details of these transactions.. 

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A source document is a paper or digital record that provides evidence or proof that a financial transaction has occurred.

For Example, In our business, we keep source documents such as Receipt, cheque butts, Invoice etc.

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[Audio] There are five accounting elements. Assets, liabilities, owner's equity, revenue & expenses.. 

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Assets
Liabilities
Expenses
Elements
of Financia
-..Statements
Owner's
Revenues
Equity

[Audio] Assets have the potential to provide future economic benefits to the business. Since our business owns the assets, it can decide when & how it can use the assets.. 

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An asset is a present economic resource controlled by the entity as a result of past events.

For Example, In our business, we have assets such Bank, Furniture, Shop Fittings, Office Equipment, and Delivery Van.

[Audio] Accounting equation helps us assess the financial position of our business. It also helps to assess how the assets in our business have been financed.. 

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Elements  Increase/Decrease/No effect Amount $ Assets  Increase $10000 Liabilities  Increase $10000 Owner’s Equity  No effect 0

The accounting equation states that assets must always equal liabilities plus owner's equity.

For Example, In January 10, we purchased an Office Equipment for $10000 on credit. Effect of this transaction on accounting equation is shown below :-

[Audio] According to Double Entry accounting, each transaction will affect at least two accounts and effects of each transaction will keep the accounting equation in balance. It also ensures that the total assets side in Balance Sheet matches with total equities side. 

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Date Accounts Elements Increase/Decrease Amount  Jan 10 Office Equipment Asset Increase 10000   Creditors Control  Liabilities Increase 10000

Double entry accounting is a system that records all the effects on the accounting equation for each financial transaction that occurs.

For Example: the previous transaction of January 10, where our business purchased office equipment for $10000 on credit, has been recorded in the Balance Sheet by following double entry accounting systems. The recording procedure is shown in the table below:

The Accounting Process

To record & report the financial information, we follow the accounting process

avatar

Source Documents, recording, reporting, and advice.

A financial transaction is an agreement between two parties which needs to be evidenced by Source document.

Source document provides the details of these transactions.

Assets, liabilities, owner's equity, revenue & expenses.

Assets have the potential to provide future economic benefits to the business.

Since our business owns the assets, it can decide when & how it can use the assets.

Accounting equation helps us assess the financial position of our business.

It also helps to assess how the assets in our business have been financed.

According to Double Entry accounting, each transaction will affect at least two accounts and effects of each transaction will keep the accounting equation in balance.

It also ensures that the total assets side in Balance Sheet matches with total equities side

The Accounting Process

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