It’s no secret that many Canadian companies struggle to manage their financial records. As consumer behaviour quickly evolves globally, companies have to handle customers on online and physical platforms, which makes financial reporting a nightmare.
It’s crucial to understand the accounting cycle to run a successful business. This process includes recording, classifying, and summarizing financial transactions to generate meaningful financial insights.
Continue reading this blog to get a complete breakdown of the business accounting cycle. We’ll cover each step in the process and explain how it can benefit your business.
Identify And Record The Type Of Transactions
The first step in the accounting cycle is to identify and record transactions. The transaction process involves examining financial transactions. There are four main types of transactions, including asset, liability, equity, and revenue.
Once you’ve identified the type of transaction, you’ll need to record it in the appropriate accounting records. This step is crucial because it ensures that all financial transactions are recorded and can be used to generate accurate financial reports.
Make Financial Statements
Making a financial statement is significant because it provides insights into the financial health of your business. You can use financial statements to make informed business decisions, track progress over time, and conduct efficient risk management.
Here are the three types of financial statements you should know about:
- Balance sheet: It gives a snapshot of your company’s assets, liabilities, and equity
- Income statement: It shows your firm’s revenue and expenses
- Cash flow statement: It tracks your company’s cash inflow and outflow.
Tweak Journal Entries
After recording financial transactions in the journal, businesses must adjust these entries to reflect accruals and deferrals. Adjusting journal entries are made at the end of an accounting period to correct errors and omissions. You can use journal entries to allocate income and expenses to the correct period.
Adjusting journal entries are significant because they ensure that the financial statements are accurate. They can also help businesses save money by deferring taxes.
Close The Books
The final step in the accounting cycle is closing the books. You must reset all temporary accounts to close the books. You can update the permanent accounts with the new information once you’ve reset the temporary financial accounts. The closing books process ensures that your financial statements are accurate and up-to-date.
Get Affordable Accounting And Bookkeeping Services In Canada
Want to manage your company’s accounts but don’t know where to start? You’ve come to the right place! At Accounting Plus, we provide accounting and bookkeeping services for small business Toronto to our esteemed clients for over twenty years. We serve customers in various Canadian cities, including Markham, Richmond Hill, Toronto, and Ontario.
We also provide excellent Professional Accounting Solution Toronto. We also make extensive business plans for startups and help them kick-start their commercial projects.
Contact the representatives at Accounting Plus for more details about our top-of-the-line accounting services.
