Accounting process

• Accounting- Define as a service activity
• External user- They are group of individuals who are not directly concerned with the day to day operations of the entity
• Internal user- Management personnel in all levels within an entity who are responsible for the planning and control of operations
• Investor- They are concerned with the risk inherent in, and return provided by their investment
• Lenders- They are interested in information that enable them to determine whether their loans, and the interest attaching to them will paid when due
• Suppliers and other trade creditors- they are interested in information that enable them to determine whether amounts owing to them will be paid when due
• Employees- interested in the information about the stability and profitability of their employers
• Customers- they are interested in information about the continuance of an entity, especially when they have long term involvement
• Government and their Agencies- interested in the allocation of resource and therefore the activities of entities
• Public- they are interested in information about the trends and recent developments in the prosperity of the entity and the range of its activities
• Recording phase- include collecting information about economic transaction and the recording of these transaction is in the appropriate accounting records
• Documentation- preparing or receiving appropriate business documents
• Journalizing- process of recording transactions for the first time in the accounting books called journal
• Posting- transferring the recorded transaction in the journal to accounts
• Contra accounts- account established to record deduction from related accounts
• Adjunct account- accounts set up to record additions to related accounts
• accounting process- also known as accounting cycle
• accrued expense- expense incurred but not yet paid
• accrued income- income earned but not yet received or collect
• closing entries- entries prepared at the end of accounting period
• Depreciable amount- the cost of an item of property minus its residual value
• general journal- most flexible type of journal
• general ledger- principal ledger that contains all the accounts reported in financial statement
• Journals- also known as books of original entry
• Ledger- also known as books of final entry
• prepaid expense- expense paid or acquired in advance
• Post closing trial balance- prepared after closing the books
• Special journals- journals used to record repetitive or frequently occurring transactions
• Subsidiary ledger- A ledger provides details of a general ledger account
• Trial balance- A list of general ledger account with their corresponding balances
• Unearned income- also known as differed income