Tally Accounting solutions to support you in running your company the way you want to.
The accounting cycle is mainly to perform a series of activities such as recording, categorising, and summarising the full accounting for each accounting period. The term ‘cycle’ indicates that it should proceed at regular intervals.
Is it worth managing the accounting cycle?
Accounting cycles can be performed monthly, quarterly, or annually depending on the organisation’s requirements. After the completion of the accounting cycle, a new process begins that allows the ten-step of accounting procedure.
The accounting cycle helps manage business transactions from beginning to end efficiently and in an efficient and organised manner. The accounting process cycle varies depending on the organisation’s reporting requirements.
Every stage of the accounting cycle is crucial to accurately recording transactions and managing the company’s finances each time a purchase is made or revenue is generated.
Let’s dive into the steps of the TallyPrime accounting cycle process:-
- Identifying Financial Transactions
The first step in the accounting cycle is to identify the financial transactions and gather information regarding the transactions that occurred in the company. Recordkeeping is crucial for all sorts of transactions. The bookkeeper analyses the transactions that have impacted the account.
- Record transactions in a journal
This step involves recording each transaction as a journal entry in the ledger accounts. The type of accounting determines the expense as well as income. Remember that cash accounting only requires the transactions to be documented when money gets exchanged, whereas accrual accounting demands that the revenue and expenses be matched.
The balance sheet and income and cash flow statements are meticulously maintained by double-entry bookkeeping, which records each transaction in a separate journal.
- Record journal entries in the general ledger
The process of tracking financial transactions begins immediately after the transaction gets entered as journal entries. Then the general ledger separates into various accounting tasks.
- Preparing and reviewing the trial balance
The cycle calculates a trial balance after the accounting period. The trial balance account, which has debit and credit columns and allows you to publish the ledger account’s closing balance, must be included alongside the ledger account. By doing this, the entire credit and debit balance should be equal.
- Adjust journal entries
TallyPrime offers a variety of voucher kinds, including Purchase, Sales, Payment, Receipt, Journal, and others, as opposed to only one sort of transaction (voucher), namely “Journal.”
In this step, adjusting entries are needed to make any transactions successful. It impacts the revenue and expenses after the accounting period. The worksheet needs to be analysed to identify any entries that need to be adjusted accordingly. You should examine the balance to locate problems in debit and credit transactions.
- Review the adjusted trial balance
The Trial Balance is easily accessible using TallyPrime. For your business, you can periodically prepare the trial balance, for instance at the conclusion of a quarter or fiscal year. This will guarantee that the entries in your books are made in a mathematically sound manner. Any mistakes or inconsistencies are simple, and you may make the required corrections.
- Produce financial state
With Tallyprime, the final financial statements of the accounting cycle are required to adjust the trial balance. It may include cash flow statements, income statements, and balance sheets. The financial statements are the most crucial outcome of the accounting cycle by analyzing the competitors.
- Posting close journal entries
In TallyPrime, after closing entries at the end of the accounting year, the transfer of any temporary accounts to permanent balance or income sheets finalises the account requirements. It is considered the best method to file the paperwork that helps to start planning for the next accounting period by preparing for the subsequent financial year. The financial statement provides an analysis of performance over the period.
- Review post-closing trial balance
Credit and debit should be equal. If the permanent account appears on the closing trial balance, the temporary account can be closed. You must ensure that the debit and credit are equally balanced in TallyPrime.
- Recording reverse entries
In TallyPrime, reversing entries works to clear out any accruals that you do not want to be reflected in the new accounting period. It is recorded at the beginning of the accounting period to avoid any mistakes in further transactions.
With TallyPrime, you can get the facilities that are required to handle banking transactions and reconciliation, business projections, various currency handling and account verification. Based on the nature of the accounting entries and the accounts they impact, TallyPrime categorises transactions as accounting or inventory. You also receive a Statistics report, which summarises the types of accounts and vouchers in your accounts.