Question

Make a comment at least 120 words

"An account is an individual accounting record of increases and decreases in a specific asset, liability, or stockholder’s equity item. An account consists of 3 parts; one a title of the account, two a left or debt side, and three a right or a credit side. It is called a T-account because the alignment of the parts of the account resemble the letter T.

The basic steps in the recording process is:

1), analyze each transaction in terms of its effect on the accounts. Each transactions before writing it in the journal are analyzed according to its effect on the account. The transactions are entered in the ledger first and then their effect is analyzed in terms of the effect on the accounts.

2) a source document, such as a sales slip, a check, a bill, or cash register tape provides evidence of the transaction. The source document is a record of information that describes the financial information in terms of their internal purpose of business.

3) Enter the transaction information in the journal. It is recorded in a journal and then the information in the journals is posted into the accounts which are stored in a general journal.

4) Transfer the journal information to the appropriate accounts in the ledger or the books of accounts. After the journal entries are made, the next step would be to post the journal entries into the ledger. Posting refers to the process of transferring entries in the journal in to the accounts in the ledger. "

Answer 1

Accounting can only be done when financial data is given i.e. data is given in monetary form. In the above paragraph they are trying to explain basic concepts of accounting.In the very initial paragraph it is clear that whenever we do any business it has maintain many records at same time and we maintain individual accounting records called Accounts.  As mentioned it (T shaped) has three parts, Title which is unique name of that particular account and debit & credit side indicates the changes occurring in that account . Note that every transaction have double effect i.e. it affects two accounts at a time and vice-versa entry is made in both the accounts to balance the books.  

As per definition " It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information of any entity .

Now comes the process of accounting -

The basic steps in recording process is already given in question so lets take an easy example, lets says Sam purchased goods paying cash.So

1) So first step is to identify which account it will affect, the answer is Purchase (goods) account and cash account, and then journal entry will be made which will be posted in general journal. i.e.

Purchase a/c Dr

To Cash   

2) The source document of this transaction will be an invoice or a bill provided by supplier. it provide the basis of making entry. in case of conflicts it provides clarity.

3) Now this entry will be posted in ledger and this process is called posting. it each journal entry will affect two accounts. in this case it will affect purchase a/c and cash a/c.

4) Further on ledgers will be forming the financial statements and all the balances in the ledger will be shown in balance sheet at year end.