Doroshenko J.

PhD Zhukova O.S.

PhD Petrachkova O.L.

Donetsk State University of Management

The basic steps of accounting

Each time an item is purchased or sold, a bookkeeper performs the first three steps of the cycle and passes on the information to the accountant who carries out the last four steps such as:

1) calculate adjustments;

2) prepare adjusted trial balance;

3) prepare financial statements;

4) close entries.

The most common reasons the accountant should consider preparing adjustments are the following: increased revenue (for example, interest earned but not yet received); any government taxes or employee salaries that have not yet been paid; the value of the office supplies that have been used (electricity, water, etc); depreciation of the assets; changes in the inventory etc. As to inventory, it involves the physical measurement, counting and evaluation of items for sale. Inventory evaluation is subject to a variety of accounting methods, since many inventory items cannot be specifically calculated. The grain in a grain elevator, for example, coves from different sources and may have been bought at several prices. An accountant must choose between one of several methods for valuing the grain; each will provide a slightly different value figure. On the fifth step when the adjustments are calculated, the accountant prepares an adjusted trial balance that combines the original trial balance with the effects of the adjustments. The balances in the accounts are the data that make up organization’s financial statements as a balance sheet and an income statement. The preparation of these statements is considered to be the main purpose of the sixth step. The final step comprises a series of bookkeeping debits and credits to transfer sums from income statement accounts into owner’s equity accounts, and thus into capital. Such transfers reduce to zero the balances of all account, therefore the accounting books will be ready for the next accounting period.

Literature

1. Kieso and Weygandt. Intermediate Accounting. John Wiley &Sons, 1989. ISBN: 0-471-63098-5

2. The development of SEC Accounting. Edited by G.J. Previts. Addisson-Wesley, 1981. ISBN: 0-201-05784-0

3. L. Chasteen, R. Flaherty, M. O’Connor. Intermediate Accounting. McGraw-Hill, 1989. ISBN: 0-07-557638-4

4. R. Baker, V. Lembke, T. King. Advanced Financial Accounting. McGraw-Hill, 1989. ISBN: 0-07-003366-8

5. Comparative international accounting/ edited by Nobes C. and Parker R. Prentice Hall, 1995. ISBN: 0-13-328733-5

6. Arrapan J., Radebaugh L. „International Accounting and multinational enterprises“. John Wiley & Sons, 1985. ISBN 0-471-88231-3

7. Fox S., Rueschhoff N.G. „Principles of international accounting“ Austin Press, 1986. ISBN: 0-914872-22-2