Accounting Basics Essay

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Accounting is a way to provide information that” identifies, records and communicates the economic events of an organization”(Weygandt, J., Kimmel, P., & Kieso, D., 2012). In order to ensure that businesses and accountants produce similar financial statements, they are held to generally accepted accounting principles or GAAP standards (Weygandt, 2012). In addition to GAAP standards, the Sarbanes-Oxley Act of 2002 was passed by Congress to help reduce unethical behavior by large businesses (Weygandt, et. al., 2012). The combination of the two provides reassurance to stakeholders or interested parties that the financial statements are uniform and provide reliable data. This is of the utmost importance for a business to be …show more content…
Each step also needs to be performed in specific order. There are nine basic steps in the accounting process (Weygandt, et. al., 2012).
First, it needs to be decided if a business transaction occurred. If it a business transaction has occurred then it has to be determined what kind of transaction took place. Each transaction will affect two aspects of the equation every time (Weygandt, et. al., 2012). If there is an increase in an asset then there has to be a decrease in another asset or a decrease in a liability, for example.
Once it is determined that a financial transaction has taken place, the transaction is then recorded in a Journal. Transactions are recorded in the order in which they took place, either as a debit or a credit (Weygandt, et. al., 2012). The Journal provides an easy way to look at each transaction to make sure it was recorded correctly. Once the Journal entries are all made and are correct the transactions are recorded in the General Ledger (Weygandt, et. al., 2012). The act of physically transferring the data from the Journal to the Ledger is called Posting (Weygandt, et. al., 2012).
The Ledger is a list of the individual accounts the company uses to conduct its daily business (Weygandt, et. al., 2012). It shows account balances and also gives a description of each transaction (Weygandt, et. al., 2012). The Ledger also gives a Reference number that relates to the page in the Journal on

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