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Financial & Managerial Accounting
Found in: Page 79
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Discuss the steps in processing business transactions.

Processing of business transactions starts from identifying the events and ends with making final accounts. The middle steps include the presentation, classification, and summarization of accounts.

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Step by Step Solution

Business transactions

Business transactions are any event that can be expressed in monetary terms. These are the trigger points for making financial statements. Some of the examples of business transactions are –

Purchasing fixed assets, making sales, payment for interest expense, rental income, etc.

Steps in processing business transactions

Following are the steps to process business transactions –

a) Identifying and collecting all source documents to validate the transaction.

b) Analyzing the transaction using the accounting equation.

c) Record the identified transactions in the journal book chronologically.

d) Post the recorded journal entries into the different ledger accounts.

e) Make the trial balance by taking the balancing figure of all the ledger accounts.

f) With the help of the trial balance prepare the final financial statements.

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