Hi, Im really not understanding how to do my homework. \"Make a presentation bef

Question

Hi, Im really not understanding how to do my homework. "Make a presentation before your organization's board of directors on how financial information flows through an accounting information system. To make your presentation move smoothly from the beginning to the end and not to lose any of the board members (and to keep them awake), you have decided to make an outline that shows the flow of information and the steps necessary for their understanding. You also need to make some notes on each step so you have a cheat sheet." Please help. Thank you in advance

Explanation / Answer

All accounting information starts with an economic event that affects the business financially, and therefore, such events will become transactions.Thus the first step in accounting is to analyze transactions. This means that you will need to decide what accounts this transaction affects and the amounts that will either increase or decrease the account balances. Once this is decided, you will need to journalize this entry. This second step is called journalizing because you are now putting the information for the first time into the “books” or “journal” of the business. This is also where debits and credits of accounting come into play. Remember that debits and credits can mean both an increase and a decrease in an account. This is dictated by the type of account, whether it is an asset, a liability, revenues, expenses, withdrawal, equity or capital, and the like. After journalizing comes the third step, posting. Posting is the transfer of the accounting information from the journal to the individual accounts, which is called the ledger.When this step is complete, all accounts will have a new balance. The debits and credits balances of all the accounts will be added together to form a trial balance, the fourth step of an accounting cycle. As the name of the trial balance suggests, this is when the accountant wants to make sure that all debits and credits do match and balance. However, life is not always easy, and people do make mistakes; so adjustments are needed. Even without mistakes, there are certain type of transactions that are known as adjustments, such as depreciation adjustments and recognition of expenses to match revenues; so these are normally made and entered into the journal and the ledger to then result in the sixth step, an adjusted trial balance.When the adjusted trial balance is achieved, the balances of the individual accounts now can used to compile the financial statements. In this seventh step, the financial statements will include the income statement, the statement of owner’s equity or retained earnings, the balance sheet, and the statement of cash flows. Once the statements are complete, we can close the books so that we can start counting for the next period.This eighth step is known as the closing, where closing entries will be performed. All the accounts that are period-based will be closed, whereas others will remain open and carry the new balances forward. Finally, we reached the ninth and the last step, the post closing trial balance. Once more, trial balance is compiled to ensure the accuracy of the data to be carried forward to the next period. Now how does this translate in the hospitality environment? Well, a waiter rings up on a point-of-sale system a customer’s order; and when the customer pays his or her bill, whether by cash or using a credit card, that is an economic event that has a financial impact on the business and will trigger a transaction analysis. A restaurateur writing a check to pay the produce company for the fruits and vegetables delivered is also an economic event. A hotel guest checks out and the folio is closed on the property management system is another example. A country club member sending a check to pay for his or her monthly dues is another transaction. All the information then is taken to the controller’s office for analysis, journalizing, and posting to create trial balances, adjusted trial balances, and, eventually, financial statements. Analyze business transactions ----- Journalize the transactions ----- Post to ledger accounts ----- Prepare a trial balance ------ Journalize and post adjusting entries: Prepayments/Accruals ----- Prepare an adjusted trial balance ----- Prepare financial statements: Income statement Retained earnings statement Balance sheet ----- Journalize and post closing entries ----- Prepare a postclosing trial balance

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