The number of steps of the accounting stages varies according to the accounting system, the nature of the work, the specialization of the business and its size, but all agree on the accuracy and control of the accounting process.
All of them agree on the necessity of providing accurate and rapid legal accounting documents, books and records that provide the management of the institution with the financial data and reports it requests for decision-making, policy-making and planning based on knowledge of the resources, assets and assets at their real value and the obligations they have to others.
The first stage: Analyzing, identifying and proving the financial transactions subject to accounting
The first step in the accounting stages includes the collection of financial operations by counting the documents of commercial transactions, which is the collection of sales and purchase invoices, receipts, expenses, revenues, bank accounts, and customer payments, and analyzing and classifying them, converting them into a daily entry, and recording this entry. Proving these values through documents, ensuring that the balances in both the debit and credit parties are similar, and adhering to the nature of the balanced accounts that determine the two parties to the entry so that the entry is recorded correctly. A transaction that occurs on both the debit and credit accounts.
The second stage: Posting entries and transactions to the ledger
The financial information that has been recorded is posted and unloaded to the general ledger, which is an organized and organized financial preparation list that shows the impact of each transaction on the company’s accounts, and the financial records of the work are recorded in it. Continuous, and to it the values in each party are transferred to its own account, and all accounts are monitored according to their receipt in the journal entry, and they are monitored to meet the debit and credit values.
The third stage: preparing the trial balance
The stage of preparing the trial balance is important to display the movements and balances of the financial accounts of the company’s accounts that have been posted, and it shows the total movements for each account, and is divided into debit and credit according to the double-entry accounting rules, so that the accounts of the debit and credit are equal, which is the last stage to confirm the validity of the value of the financial balances, to ensure From the absence of errors in the values recorded in the entries and the parties to the accounts, an initial audit account is made in preparation for the final trial balance step.
An accurate accounting program can be used to extract the trial balance for any period during the fiscal year.
Fourth stage: Preparation and proof of settlement entries
Adjustments entries or (inventory adjustments entries) are transactions through which balances, deferred, accrued, depreciated and tax adjustments are processed, in order to meet revenues with expenses in the relevant accounting period, and to ensure that the entries are controlled and adjustments are made, and knowing the correct balance of the main accounts of the company, and they are divided into revenues and expenses Accrued, advance income and expenses, non-cash financial transactions, and financial settlements for accounts can be prepared through an automated accounting program
Stage Five: Trial Balance After Adjustments
After completing the review and posting of the inventory adjustment entries, the stage of creating the final trial balance comes, and at this stage the debit and credit accounts are combined to ensure that they are controlled, and the debit and credit balances are similar.
Sixth stage: preparing financial statements and cash flows
Clarify the company’s profits or losses through the revenue and expense account, which will be carried over to the balance sheet, which shows the financial balances of the company’s main accounts, and a balance between the company’s debit and credit parties, and through which administrative operating plans can be drawn for the next stage, and it is determined:
Income list
Statement of changes in owner’s equity
Statement of financial position
Statement of Cash Flows
Seventh stage: closing accounts
After preparing the financial statements, the temporary accounts, which are the accounts of income and expenses, shareholders’ withdrawals or personal withdrawals of partners, and the profits distributed in the income summary account are closed. The closing entries are considered closing the company’s financial year and its accounts are carried over to the new financial year. After the profits and losses have been calculated; This is to close the income and expense accounts for the income statement, and also to make the capital account to close the personal withdrawals account.
