Question

Write to your manager explaining the steps followed in the completion of the accounting cycle. Discuss how automation has facilitated the processing and reporting of financial information to stakeholders and the significance of each financial statement, and the links among financial statements.

Answer 1

Answer:

Accounting is an art of recording, classifying, summarizing the financial information & interpreting thereof to the management & users of financial statements.

The accounting cycle starts with the occurrence of data & ends on the preparation of financial statements.

Accounting passes through the various cycling process such as:

• Raw data such as voucher etc: The accounting process is started with the voucher or initials financial data for example invoices etc.
• Journal entries: After vouching need to make the journal entries in books of account to record the impact of each transaction.
• Ledger: After journalizing, the data needed to be entered in the accounts for which they relate for example data related to sales is transferred to sales account, etc.
• Trial Balance: after making the ledger trial balance are prepared to know the accuracy of the balances carried forward from the respective ledgers account, the trial balance is always tallied.
• Financial statement: After, preparation of trial balance finally need to prepare the financial statements such as a statement of profit & loss, balance sheet, statement of cash flow, etc.

Preparation of financial statements passes through various accounting cycle which takes too much time in recording the transaction to report.

But in an automated environment once the input is entered in the software it has competed for all the accounting cycles simultaneously & which takes a few seconds to update the transaction. the automated environment also helps in generating the various types of the report such as debtors receivable, accounts payable, etc.

Automation has facilitated the processing and reporting of financial information to stakeholders and the significance of each financial statement, and the links among financial statements as in such a environment record to report are generated at the same time & hence save the time & effort of variuous manpower which results in minimizing the error occured while preparing the financial stateemnt.