Accounting cycle and its procedures applied to the company

INTRODUCTION

The accounting cycle is the period of time in which all the transactions that occur in a company are recorded, whether monthly, quarterly, semi-annually or annually; the most used is the annual one.

The accounting cycle procedures are those steps that are performed to finally show the financial information of a company.

Knowing that a capital company is made up of several partners and that its income comes from sales of merchandise or services, it is necessary to define then what a newspaper is and what it is a major.

The newspaper is the book in which the operations of the companies are recorded or recorded when making a transaction. This is also known as the first annotation book.

Among the characteristics of a newspaper we can mention that it has a first column indicating the date, then another where the detail is noted, a third one called a reference which is where the number or code corresponding to the account that is loaded is noted; It has three columns in a row where an auxiliary, the debit and the credit will appear; in the auxiliary the amount of an account that has been loaded or credited and that the same has its auxiliary account is noted; In the debit the amount charged will be noted, and in the credit the amount credited.

The oldest is a second entry book which receives the information from the newspaper indicating the debits and credits that were made in the newspaper. The passes to the major must start with the debit entry pass, the data is recorded on the left side of the debit account; in the date column, the date, in the reference column, the number of the page where the entry was taken, in the value column the amount of the debit.

Making this clear we present this work which defines the accounting cycle procedures applied to a company, capital company.

DIARIZATION OF OPERATIONS.

The data that the accountant takes to make a journal entry is taken from the source documents. Journal entries are the act of recording all the transactions of a company.

Operations in the newspaper are recorded as follows:

First, each operation is analyzed by asking what increase or decrease did the operation produce in the assets, liabilities or capital of the company ?; after having the answer we will know to which account we must load or credit.

After this analysis, the transaction will be registered in the newspaper, initially we write down the date the transaction was made (year, month and day), then write the name of the account to be loaded, and in it line, the debit amount is entered in the left column and the credit amount is entered in the right column. A brief description of the source document is written in the account name column immediately below the last item of the credit. It is always advisable to leave a blank line after each seat, although in Spanish-speaking countries it is not allowed.

The newspaper fulfills three useful functions: firstly, it reduces the possibility of errors, because if the operations were registered directly in the major, there would be the serious danger of omitting the debit or credit of a seat, or of entering the same debit twice. or credit. In the journal, the debits and credits of each operation are recorded together, which allows this type of error to be easily discovered; secondly, the debits and credits of each transaction are recorded in the newspaper keeping perfect balance, thus achieving the complete record of the operation in one place. In addition, the diary offers ample space to discover the operation in the desired detail. Third, all the data related to the operations appear in the diary in their chronological order,Thus providing a chronological history of the operations of a company.

The Commercial Code in the Dominican Republic establishes that every merchant is obliged to have a daily book that presents the operations of his trade per day. That it will be carried in the Spanish language and will be foliated, initialed and endorsed once a year by the civil and commercial judge of the business jurisdiction.

DETERMINATION

The determination of account balances is nothing more than to carry out the following steps:

1. The debit column is added, writing down the total at the bottom of it.

two. The column of credits is added, writing down the total at the bottom of it.

3. The balance is entered in the description column: on the line of the last debit entry, if the balance is due; and if you are a creditor in the last entry line.

If only one entry appears on either side, that is, debit and credit, it is not necessary to enter the balance.

Account balances are nothing more than the difference between the debit and credit items of an account. It is debtor when debits exceed credits and creditor otherwise.

TRIAL BALANCE.

It is a list of all debit and credit balances of all G / L accounts to check equality, adding them in separate columns; This is so as a consequence of the fact that double entry accounting derives its name from the fact that the registration of all operations requires the entry of debits and credits of an operation that add up to the same amount, it is obvious that the total debits of all the accounts must equal the total credits.

The trial scale is used to locate errors within an identified period of time and makes it easy to find them in detail and correct them. It is a very convenient list of the account balances that will be used in the preparation of the Financial Statements.

It is useful to check the mathematical accuracy of the major and provide the accountant with information to prepare the periodic Financial Statements, since it is much easier to use the Balance data than taking it directly from the major.

WORK SHEETS.

They are a mechanical means, columnar forms that counters use as a means of conveniently and orderly organizing the accounting information that will be needed in the preparation of adjustment entries, periodic statements, and closing entries. They summarize the data that must be included in the adjustments and closing entries.

Form to prepare a worksheet:

1) The heading is written on 3 lines; each game is centered.

2) The column headings are written.

3) The details of the Trial Balance are recorded.

4) Adjustment entries in the adjustment columns. The concept of each adjustment is indicated at the bottom of the worksheet, with a key letter that also appears next to the debits and credits of the adjustment columns.

5) Items of assets, liabilities and capital to the columns of the Statement of Position.

6) Items of income and expenses to the columns of the income statement.

7) Totalize columns of the Income Statement and columns of the Status.

8.) The net income (or net loss) is calculated and recorded.

9) The net income is taken to the credit of the columns of the Statement of Situation.

10) Double lines are drawn below the last totals of the Income Statement and Situation Statement columns. These lines show that all work has been completed and it is assumed to be correct.

The worksheets serve as the basis for preparing:

• The Income Statement

• The Balance Sheet

• The journal adjustment entries

• The closing entries of the newspaper

FINANCIAL STATEMENTS.

The Financial Statements are essentially numerical documents that on a date or for a determined period present the financial situation of a company, the results obtained in a determined period and the behavior of the cash. The importance of the Financial Statements is given by the need for companies to know and publicize their determined situation, generally in an accounting period of 1 year or less.

The Financial Statements must comply with the requirements of: universality, when expressing clear and accessible information; continuity, in regular periods; periodicity, which are carried out periodically; opportunity, that the information they get is timely rendered.

The Financial Statements are:

• Status or Balance Sheet

• Profit and Loss Statement

• Cash Flow Statement

They are newspapers because they are prepared after the end of each accounting period, which is generally 12 months. All Financial Statements must contain the name of the business, the name of the State and the period covered.

Balance Sheet or Situation Statement.

It shows the nature and amount of all assets owned, nature and amount of the liability, type and amount of residual investment of the owners of a business. Its purpose is to provide a clear and precise report to the parties interested in the company on the situation of the company at the end of a business year. It is prepared with the real accounts of the trial balance and with the Statement of Undistributed Profits.

In his most complex samples, he reveals the source of the funds used in the business and defines the area to which these funds were applied.

The items in the balance sheet are classified as:

• Assets: sum of assets, resources and rights owned by the company

• Liabilities: obligations or commitments that the company has acquired towards third parties

Capital or equity: difference of assets and liabilities, represents the investment or contribution of partners and entrepreneurs over which they may be entitled

Income or Profit and Loss Statement.

This is done in order to know what were the profits in a given period. The success of a business is judged mainly by its earnings, not only by amount, but also by the trend they show. This State presents the excess of income over expenses, which gives rise to net profit and the excess of costs and expenses over income is called net loss.

If the result is net profit, the stockholders' equity of the company increases, if it is a loss it decreases.

Despite the considerable variety in the basic format and arrangement of financial items, in the Statement of Profit and Loss it is necessary to have the following data:

a) Sources of income from operations.

b) Main commercial expenses of operations.

c) Operating gains and losses during the period.

d) Income taxes.

e) Net profits or losses that affect all other items of income and expenses for the period.

The analytical sections of this State are:

1) Sales category.

2) Category of merchandise costs.

3) Category of operating gases.

4) Category of other income and expenses.

5) Net profit or loss for the period.

This State may include reports to shareholders so that they form an opinion on the progress of the company and the efficiency of the administrators. It can be presented to banks supporting loan applications so that they can judge the profit prospects of the applicant company.

Investors can use this statement to decide the advisability of acquiring, keeping or disposing of the securities issued by the company (its shares).

Cash flow statement.

This state is prepared by analyzing all the movement concerning the entry and exit of specific troops.

It can be defined as a document that presents the impact that a company's operating investment and financing activities have on its cash flows throughout an accounting or fiscal period.

The purpose of the Cash Flow Statement is to show the pertinent information about the cash receipts and payments of a company during a period.

The purpose of this Statement is: to assess the ability of the company to generate future cash flows; assess the company's ability to meet its financing needs; Evaluate the reasons for the difference between net earnings and the associated cash receipts and payments.

The activities of a company can be classified according to the following lines:

a) Operational activities.

1) Cash received from clients.

2) Cash paid to suppliers.

3) Cash paid for interest, etc.

a) Investment activities.

1) Sales of fixed assets.

2) Acquisition of fixed assets.

b) Financing activities.

1) Public loans.

2) Issuance of shares.

3) Payment of dividends.

Statement of Undistributed Profits.

The undistributed profits of a company represent the part of the social patrimony that has had its origin in the profits of the business. They constitute the excess of the total profits of the company, from its organization, over the total dividend that has been distributed to the shareholders.

It is important to distinguish share capital from undistributed earnings and to maintain this distinction in the States and accounts, since the amount of undistributed earnings generally has some influence on the amount of dividends. In addition, those interested in the Financial Statements consider it useful to know what part of the stockholders' equity comes from investments by the shareholders, and what part is attributable to the retention of profits.