The three fundamental steps of the accounting process
Explanation:
It is a process where a series of procedures are followed to collect, process, and communicate financial information.
The three fundamental steps in the accounting process include identifying and analyzing business transactions, recording them in the journal, and posting them in the ledger.
The most important step in the accounting process is to identify a particular transaction. There are many transactions that a company undertakes throughout the accounting cycle. Each of them needs to be properly recorded in their books.
Creating journal entries for each transaction is the second step in the accounting process. Depending on the transaction whether it is cash or accrual, the transactions are officially recorded. An accrual accounting requires matching revenue with expenses so that both must be booked at the time of sale. Cash transactions need to be recorded when cash is paid or received
The third most important step is to post the transaction in the ledger. Ledger provides analysis of each accounting transaction by account. Which will help a bookkeeper to keep an eye on the financial position.
