Basic Phases of Accounting

May 29th, 2015
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Murray State University
Course: general
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There are four basic phases of accounting: recording, classifying, summarising and interpreting financial data. Communication may not be formally considered one of the accounting phases, but it is a crucial step as well. All accounting information should be communicated properly to the appropriate parties after analyzing

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Basic Phases of AccountingThere are four basic phases of accounting: recording, classifying, summarising and interpreting financial data. Communication may not be formally considered one of the accounting phases, but it is a crucial step as well. All accounting information should be communicated properly to the appropriate parties after analyzing. Accounting reports must be prepared and distributed, and should include the basic income statement and balance sheet, as well as additional information including accounting ratios, diagrams, graphs and funds flow statements.1) Recording:Recording is a basic phase of accounting that is also known as bookkeeping. In this phase, all financial transactions are recorded in a systematical and chronological manner in the appropriate books or databases. Accounting recorders are the documents and books involved in preparing financial statements. Accounting recorders include records of assets, liabilities, ledgers, journals and other supporting documents such as invoices and checks.2) Classifying:The classifying phase of accounting involves sorting and grouping similar items under the designated name, category or account. This phase uses systematic analysis of recorded data in which all transactions are grouped in one place. For example, "travel expenses" might be a category that accountants use to classify expenses relating to company travel. The term "ledger" refers to the book in which classifications are recorded.3) Summarising:

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