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Acc 201 Final Project Part 1 Accounting Cycle

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ACC 201 Final Project Part I Accounting Cycle Report
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Southern New Hampshire University

Accounting records provide detail information of all transactions and events occurred in a business enterprise during the accounting year. To maintain accounting records, accounting cycle has a vital role. In this project we are going to discuss about the accounting cycle, its role in maintaining records, steps in accounting cycle, effects of omitting steps in accounting cycle on business progress, important financial statements and their importance.
The accounting cycle consists of the following steps: Opening accounts in the ledger with the opening balance; identifying and recording transactions events occurred during the accounting year; …show more content…
If we ignore any step then this may lead our records non-reliable and we won’t able to find out actual results of the business, which fails business to frame future strategies. Moreover, external parties, such as creditors, bank money lenders, etc. will not able to take informed decisions to continue with the business, as their all decisions depends on the accuracy of the records kept by the business. Omission of recording transactions in journal or ledger will understate purchase, sales, expense, asset or liability in the business. Ignoring trial balance will not allow judging arithmetic accuracy of the ledger posting and omitting adjustment entries will not allow us to know correct profit or loss for the accounting year and true and fair financial position of the business at the end of the accounting year. Thus, to avoid all these, we should ensure that all steps involved in accounting from recording transactions using source documents to the preparation of financial statements, are being followed properly. We can initiate internal audit system also in the business for this …show more content…
Statement of retained earnings helps the owner to know the way that net income and the distribution of dividends affect the financial position of the business during the accounting period. Balance sheet shows the value of assets, liabilities and equity at the end of the accounting year, which is useful to find out current financial health of the business. Cash flow statement shows inflow and outflow of cash during the accounting year, which helps the suppliers to find out the liquidity position of the business.
Accounting records are important for the success of all enterprises and accounting cycle plays a significant role in maintaining the records perfectly. Accounting cycle not only helps the business in maintaining records properly but it also assists in provides valuable information for the preparation of the financial statements, which later on helps both internal and external parties or stakeholders to analysis the financial condition of the business to take vital decisions. Thus, each concern needs to follow accounting cycle in order to run the business

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