Before obtaining the summaries necessary for the preparation of the statements, there's lots of activities that are carried out on a day-to-day basis. For example, when a sale is concluded an order may have been received and fulfilled. Order document from clients ought to be recorded and executed through approval by a responsible official. The issue of the goods ought to be ideally handled by an independent person from the who received the order papers. After this invoices and delivery notes are prepared by an accounting officer and passed on if feasible to another accounting officer for input in to the accounting method. Similarly, all purchases and expenses are first approved and authorized before the orders to the suppliers are sent or payments made. One time the bills from suppliers or money receipts for expenses are received, they are entered in to the method.
The original books of entry if maintained exactly form a basis on which financial statements - the statement of income, statement of financial position, statement of money flow - are prepared. The statement of income summarizes all the income and expenses for the period. The income is compared with the expenses and the net is either the profit or loss for the period. The statement of financial position shows the assets, liabilities and equity - what the business owns, what it owes and the owners interest in the business. The statement of money flow shows how the business has generated or used money in sales and expenses for the period that is being looked at. Fortunately, there's lots of application that can be used to keep a record of all the business undertakings which a subject for another day.
For assets and liabilities, recognition of transactions is carried out in a similar way. Owners equity in most cases is original amounts introduced in to the business by the owners and is increased or reduced by profit or loss for the period. The finish result of all the activities in the coursework of a given period is that a set of records in kind of Sales ledger, purchases ledger and general ledger is created. Totals in each item heading in the ledgers are used in the preparation of the statements that are relied on to gauge the business performance.
It is essential that business owners implement systems that will make definite that all that happens in the business is captured and recorded exactly. It is only then that the owners can have an correct picture of how their business is performing and make the necessary changes in the event that they find that the business is not performing well to their expectations.
The original books of entry if maintained exactly form a basis on which financial statements - the statement of income, statement of financial position, statement of money flow - are prepared. The statement of income summarizes all the income and expenses for the period. The income is compared with the expenses and the net is either the profit or loss for the period. The statement of financial position shows the assets, liabilities and equity - what the business owns, what it owes and the owners interest in the business. The statement of money flow shows how the business has generated or used money in sales and expenses for the period that is being looked at. Fortunately, there's lots of application that can be used to keep a record of all the business undertakings which a subject for another day.
For assets and liabilities, recognition of transactions is carried out in a similar way. Owners equity in most cases is original amounts introduced in to the business by the owners and is increased or reduced by profit or loss for the period. The finish result of all the activities in the coursework of a given period is that a set of records in kind of Sales ledger, purchases ledger and general ledger is created. Totals in each item heading in the ledgers are used in the preparation of the statements that are relied on to gauge the business performance.
It is essential that business owners implement systems that will make definite that all that happens in the business is captured and recorded exactly. It is only then that the owners can have an correct picture of how their business is performing and make the necessary changes in the event that they find that the business is not performing well to their expectations.
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