Computerized accounting introduces learners to utilizing the computer and accounting software in maintaining accounting records, making management decisions and processes common business applications with primary emphasis on a general ledger package (QuickBooks). The course also helps to further develop learners’ skills by providing an in-depth exposure to accounts receivables/accounts payable, payroll and inventory modules.

Course Scheduled Start Date: October 2020

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Accounting is the process or art of classifying, recording and summarizing in terms of money transactions and events of financial characteristics and interpreting the results there of. General accounting process can be explained by the Accounting Cycle.

1. THE ACCOUNTING CYCLE

The accounting cycle is the holistic process of recording and processing all financial transactions of a company, from when the transaction occurs, to its representation on the financial statements. One of the main duties of a bookkeeper is to keep track of the full accounting cycle from start to finish. The cycle repeats itself every fiscal year as long as a company remains in business. Accounting Cycle Diagram

STEPS IN THE ACCOUNTING CYCLE

#1 Collect Source Documents: Source documents can be receipts, copies of checks, copies of invoices, deposit slips, or anything else that proves that a transaction occurred. Source documents are collected when transactions occur. Thus financial transactions start the process. If there were no financial transactions, there would be nothing to keep track of. Transactions may include a debt payoff, any purchases or acquisition of assets, sales revenue, or any expenses incurred. #2 Verify Source Documents: Source documents collected are cross checked in order to ensure accuracy, this help to accurately document the financial transactions that occurred during the accounting period. #3 Analyze transactions: This involves examining source documents an analyzing transactions to determine which accounts are affected by the transactions. Note, transactions are recorded in accounts. #4 Journal Entries: With the transactions set in place, the next step is to record these entries in the company’s journal in chronological order.
#5 Posting to the General Ledger (GL): The journal entries are then posted to the general ledger where a summary of all transactions to individual accounts can be seen. The general ledger serves as the eyes and ears of bookkeepers and accountants and shows all financial transactions within a business. Essentially, it is a huge compilation of all transactions recorded on a specific document or on accounting software, which is the predominant method nowadays. For example, if you want to see the changes in cash levels over the course of the business and all their relevant transactions, you would look at the general ledger, which shows all the debits and credits of cash. #6. Prepare Trial Balance: At the end of the accounting period (which may be quarterly, monthly, or yearly, depending on the company), a total balance is calculated for the accounts #7. Worksheet: When the debits and credits on the trial balance don’t match, the bookkeeper must look for errors and make corrective adjustments that are tracked on a worksheet. Adjusting entries are also performed here where necessary. #8 Financial Statements and Closing: The balance sheet, income statement, and cash flow statement can be prepared using the correct balances. The revenue and expense accounts are equally closed and zeroed out for the next accounting cycle. This is because revenue and expense accounts are income statement accounts, which show performance for a specific period. Balance sheet accounts are not closed because they show the company’s financial position at a certain point in time.

2. ESSENTIAL THINGS TO NOTE

A. Grouping and Codification of Accounts:
When the volume and size of the business increase, the number of transactions increases. Therefore it is necessary to have proper classification of data.Therefore, it becomes necessary to have proper classification of data.In any organisation, the main unit of classification is the major head which is further divided into minor heads. Each minor head may have number of sub-heads. After classification of accounts into various groups namely, major, minor and sub-heads and allotting codes to each account these are programmed into the computer system. The accounting general standards has classified the accounts as follows:

    • Class 1: Accounts of Permanent Resources(Equity, capital, liabilities etc)
    • Class 2: Accounts of Fixed Assets
    • Class 3:Accounts of Stocks
    • Class 4: Persona or third party Accounts
    • Class 5: Cash and Bank Accounts
    • Class 6: Accounts of Ordinary Activities
    • Class 7: Accounts of Ordinary Revenues
    • Class 8: Accounts of other expenses and revenues
    • Class 9: Accounts for contingencies and management accounting.

Codification of accounts
Code is an identification mark. Generally, computerised accounting involves codification of accounts. Codification of accounts is needed where there are numerous accounts heads in an organisation. There is a hierarchical relationship between the groups and its components. In order to maintain the hierarchical relationships between a group and its sub-groups, proper codification is required. The coding scheme of account heads should be such that it leads to grouping of accounts at various levels so as to generate various reports.

B. Debit and Credit concept of Accounting.

    • A Debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. It is positioned to the left in an Accounting entry.
    • A Credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account.

Financial transactions are recorded with this concept in mind.. In debiting one or more accounts and crediting one or more accounts, the debits and credits must always balance. Business transactions are recorded in Accounts. The maintenance and recording of transactions within these accounts is known as double-entry bookkeeping. The ‘double-entry’ term is used because each transaction can be seen to have two separate effects on the business. For example, buying a new machine for cash would affect both the asset of machinery and the asset of cash. Similarly, selling inventory on credit would affect the asset of inventory, and the liability of trade payables.

 

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