BASIC ACCOUNTING DOCUMENTS

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The transaction initiates every accounting procedure. You buy something, sell something - whatever. The idea is to make a record of every financial transaction. Where you'll record the transaction is in

The journals. This is the ground zero of accounting. Every subsequent accounting procedure goes back to a journal, which is the record of each financial transaction as it occurs. You may have separate journals for sales and cash receipts and another journal for disbursements or just one journal that includes all transaction types. Either approach is okay, but the important things to remember are to record every entry and keep the journal(s) up to date. Eventually, you'll group all these entries, using,

The general ledger. This is where you'll transfer or "post," each of the journal entries into its appropriate place in the general ledger by transaction type. This makes it faster to look up individual transactions and also provides a basis at some point - often at the end of the month or the quarter - for preparing...

The trial balance. Here's where you'll sum up all your debit entries (we're assuming you've gone the double entry route) and all your credit entries. They should match. If they don't, you'll have to go all the way back to your transaction records in your journal and work forward to see where the error occurred. Once everything balances, you can prepare...

The financial statement. At this point, your hard work pays off. You now have a document that lenders, government agencies - any entity that wants to know who you are financially before doing business with you - will accept.
This is the briefest outline of the accounting process, from its beginnings in transactions to the production of the financial statement.

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