Research What Consititutes of the Accounting Cycle? (Essay Sample)

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Accounting report is a very important activity for that helps in evaluating the performance of any business. This implies that in order to have a good accounting report that can be relied upon one must be able to understand steps that are involved in accounting reports as well as the role that each process plays. This discussion aims at building more understanding of accounting cycle. Furthermore, the study focuses on the various steps, roles as well general financial statements that are involved in when developing accounting report.
* The initial step for the accounting process deals with transactions during the initial business set up which involves the estimates of the financial expenses involved at the beginning of the business and they are recorded in a general ledger account. This step deals with opening the accounts balances
* The second step involves the identification and recording of transactions. It deals with journal entry of cash and credit transactions which the business is involved in and they are listed in chronological order to enable preparation of a trial balance.
* The third step involves posting of the ledger. This step implies that the journal entries are transferred to the appropriate T accounts with the ledger with the aim of ensuring that it accumulates a comparable nature of transaction at one place.
* The next step involves passing adjustment entries. This is done with the aim of ensuring that the principle behind the accrual process is achieved. Therefore the expenses as well as all revenues which are in the current year are recorded.
* The firth step involves the preparation of the adjusted trial balance including the previous adjustments made.
* Next, what is done is the preparation of the financial statements mainly the income statement as well as the balance sheets.
* After preparation of the financial statements, what is required next is to pass the closing entries. This is done with the aim of closing all the temporary accounts that are stated in the ledger.
All the steps in the accounting cycle have their aims. Each and every step should be followed so that there is emission of errors while doing accounts. Further, following all the steps in the accounting cycle implies that a high accuracy level will be achieved at all times.
One of the most common errors in accounting is error of omission. This kind of error do take place is situation where some date are not recorded in the journal entries thus giving inaccurate information which finally reflect in the balance sheet. For instance, failure to include all expenses or inventory quantities would give a wrong picture of the business performance. The other error is wrong classification of date in the journals such as confusing asserts and liabilities which can lead to which can impact negatively when making financial decisions. Another error is that of commission which involves entering items in the correct side of the wrong account (Nobles, Mattison & Matsumura, 2014). One of the strategies that can help in avoiding such errors is to keep all the documents concerning various transactions safe to allow for reconciliation of financial information incase of any mistake.
According to Lung (2009) balance sheet is one of the financial statements that reports on ...