Question

Discuss the steps in processing business transactions and why the recordkeeper prepares a trial balance report.

Answer 1

there are various business transactions but for recodrding puprose only those transactions taken which have financial impact or which can be measured in terms of value. Various financial transactions relate to purchase, sale, banking, journal entry, sales return purchase return, cash entry etc. The steps involve in processing business transactions as follows:

1) First need to find out whether a transaction has a financial impact on the business or not. for example buying raw material for a value of $1000 has finacial value yet getting the award for best quality has not.

2) Obtaining the Proper Document. :- Various transactions has different Authonticated documents like for purchasing indent, purchase order and origional tax invoice copy. Accounts department need to varify that all financial transactions validated by proper authority according to the standard set.

3) Recording the Transactions:- Every finacial transaction is be taken into account by proper entry and checked correct effect taken into account..

Every accountant of the company prepares a trial balalnce report to check the financial accuracy of transactions. Every transaction has debit and credit effect. Every financial transaction will whether affect the balance sheet and income statement or balance sheet only or income statement only but necessarily balancing the both side of trial balance. Therefore preparing the trial balance indicate the proper entries and proper recording in the ledger. Matching the trial balance indicate the correct entries are made. But matching the trial balance has some limitations like it cannot tell the error of principal or compensating errors etc.