Keeping clear and detailed records of all your business transactions is essential. This will help you ensure your business is running well and give you insights into its performance. For example, tracking cash flow, updating your balance sheet, and creating an income statement are all crucial tasks. But how do accounting records work? What do you need to know? Keep reading to learn about the different types of accounting records and see some examples.
What are Accounting Records?
Accounting records include all the documentation and books used to prepare financial statements or for audits and financial reviews. These records encompass assets and liabilities, monetary transactions, ledgers, journals, and supporting documents like checks and invoices.
There needs to be a universal set of business documents that everyone agrees on for accounting records. “Accounting records” is a broad term. Different people, like creditors, investors, and corporate governance groups, have distinct and changing needs for documentation.
These needs can change depending on the economic or business cycle. For example, investors might want detailed financial statements when business is booming. However, creditors might ask for more details about balance sheet items during challenging times because they are more cautious about lending money.
In short, accounting records and methods keep evolving to meet the changing things of businesses and the people interested in them.
Types of Accounting Records
Accounting records usually follow the double-entry bookkeeping method. This means every transaction has two entries: one debit and one credit. The aim is to keep the books balanced and track cash flow through the business. Here are the main types of accounting records:
Transactions
Transactions are the starting point for all accounting records. They show any item bought, sold, or depreciated by the business. Every financial activity begins with a transaction.
Journals record all a company’s transactions
There can be one leading journal for all transactions or different journals for different parts of the business. The key is keeping journals updated and recording all transactions accurately.
General Ledgers
The general ledger organizes transactions from the journals into different categories based on the type of transaction. This helps in reviewing and categorizing transactions accurately when creating the trial balance and financial statements.
Trial Balances
The trial balance summarizes all credits and debits throughout the business cycle. It ensures that all entries are balanced. It indicates errors or possible fraud that must be identified and corrected if they don’t match.
Financial Statements
Financial statements are the final documents consolidating all accounting records. They are shared with the public and regulatory bodies. Investment analysts use them to assess a company’s performance, while regulators use them to understand its financial status.
Examples of Accounting Records
There are different types of accounting records commonly used in businesses:
- General Ledger: A detailed summary of all financial transactions.
- Subsidiary Ledgers: Detailed records for specific accounts.
- Cash Receipts: Records of money received.
- Bank Statements: Documents showing all account transactions.
- Invoices: Bills sent to customers for goods or services.
- Cheques: Written orders for bank payments.
For instance, a bank statement includes:
- Your details: Name, address, and account number.
- Period covered: Typically a month, starting and ending on specific dates.
- Bank information: Contact details and error reporting guidelines.
- Starting and ending balances.
- Transactions: Deposits (like direct deposits and cheques), withdrawals (like purchases and ATM withdrawals), and fees or interest earned during the month.
To learn more about accounting, consider joining an accounting course. Explore Finprov Learning’s accounting professional courses like CBAT, PGBAT, Income Tax, Practical Accounting Training, PGDIFA, DIA, GST, SAP FICO, Tally Prime, MS Excel, and more. Whether you’re a recent graduate or an experienced professional, these courses provide a comprehensive learning experience.
Finprov focuses on theoretical knowledge and practical training to equip you with real-world skills. We also offer placement assistance with accounting courses in Kochi, helping you kick-start your career after completion. Contact Finprov today to learn more about accounting courses online and enhance your career prospects.
