The objective of accounting is to provide relevant, timely information for user decision making. Accountant must behave in an ethical manner so that the information they provide users will be trustworthy and, thus, useful for decision making.
Managers and employees must also behave in an ethical manner in managing and operating a business. Otherwise, no one will be willing to invest in or loan money to the business.
Ethics are moral principles that guide the conduct of individuals. Unfortunately, business managers and accountants sometimes behave in an unethical manner.
A limited liability company (LLC) is a corporate structure whereby the members of the company cannot be held personally liable for the company's debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship.
1. Identify the transaction from source documents, like purchase orders, loan agreements, invoices, etc.
2. Record the transaction as a journal entry.
3. Post the entry in the individual accounts in ledgers. Traditionally, the accounts have been represented as Ts, or so-called T-accounts, with debits on the left and credits on the right.
4.At the end of the reporting period (usually the end of the month), create a preliminary trial balance of all the accounts by:
(a) netting all the debits and credits in each account to calculate their balances and
(b) totaling all the left-side (i.e., debit) balances and right-side (i.e., credit) balances. The two columns should be equal.
5.Make additional adjusting entries that are not generated through specific source documents. For example, depreciation expense is periodically recorded for items like equipment to account for the use of the asset and the loss of its value over time.
6.Create an adjusted trial balance of the accounts. Once again, the left-side and right-side entries - i.e. debits and credits - must total to the same amount. (To learn more see, Fundamental Analysis: The Balance Sheet.)
7.Combine the sums in the various accounts and present them in financial statements created for both internal and external use.
8.Close the books for the current month by recording the necessary reversing entries to start fresh in the new period (usually the next month).
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