√ Definition of a Service Company, Stages of the Accounting Cycle & Explanations
Definition of Service Company, Stages of Accounting Cycle & Explanation– In this discussion we will explain about service companies. Which includes the meaning of service companies, the stages of the service company accounting cycle, which are equipped with explanations. For more details, please see the review below carefully.
Definition of Service Company, Stages of Accounting Cycle & Explanation
Let's discuss service companies here completely and thoroughly.
Definition of Service Company
A service company is a company that sells or offers services to meet consumer needs. In other words, service companies sell "goods" that have no form.
In making financial reports, especially service companies. There are eight steps that can be called the accounting cycle, namely as follows:
- Financial transactions
- Record all financial transactions, according to the original evidence of transactions in the accounting period
- Make a general journal according to note no 2
- Make a ledger
- Make adjusting journals
- Make financial reports that include income statements, balance sheets, and also reports on changes in capital
- Make a closing journal
- Prepare trial balance after closing
Stages of the Service Company Accounting Cycle
The service company accounting cycle is a process of making company financial statements in a certain period. Generally, the accounting cycle starts from the transaction to the preparation of the next company's financial statements continues with a balance that is closed with a closing entry (closing journal) or until the reversing journal.
Basically, the accounting cycle in service companies is not much different from the accounting cycle in trading companies. Both service companies and trading companies, all transactions carried out must be recorded in the books journal and then periodically recorded or grouped into accounts in the book big.
And at the end of the accounting period, all balances of all account accounts are calculated in a way that is included in the line balance which is used as a tool in preparing financial reports. Adjusting journals and closing journals are also carried out in service companies, and also by making a trial balance after closing the books needs to be done as the final stage in the accounting cycle.
In collecting transaction evidence, it is not included in a part of the accounting cycle but the basic routine of accounting activities. After collecting the evidence, financial data will be obtained.
1. journaling
Journalizing or grouping is the earliest cycle of accounting activity. From the collection of evidence above, a journal will be obtained.
2. Ledger
Creating a ledger or entering data into a ledger is the process of grouping the nominal values of each account in order to know the balance of each estimate or account.
3. Trial/Trial Balance
The next process is to make a trial balance or trial balance to find out that the input data is from the general journal into the ledger is correct by making a trial balance, looking at the position between debits and credits balanced.
4. Adjusting journal entry
The next process is to make adjustments. Namely carrying out an adjustment between the physical and the balance in the account and also an adjustment on some depreciation of equipment and so on, in this process estimates or estimates will often appear new account.
5. Work sheet
If you have made adjustments, you will enter 2 processes, namely inputting ledger data and preparing a work sheet. The first is to input the adjusting journal data into the ledger. Then input the adjusting journal entries into the work sheet and make the appropriate adjusted balance.
In the work sheet there will be adjusted balance columns accordingly. Check the balance of each estimate. If there is something that is not the same as the ledger balance with the adjusted balance, it must be checked and found where the validity lies.
6. Financial statements
The next process of the service company accounting cycle is the preparation of financial reports in the form of a balance sheet, profit and loss report and also a report on changes in capital
7. Closing Journal
The next process is to carry out closing (closing journals) for several accounts that affect all estimates and accounts in the income statement and statement of changes in capital. Closed accounts are revenue, prive, expenses, profit and loss.
8. Reverse Journal
Reversing journal is the last process. Often this reversing journal is carried out when making a reversal of several accounts that have been closed to restore their balances. Usually what is reversed is a prepaid payment that is not yet due.
9. Final/Initial Balance Sheet
Preparation of final and initial balance sheets. It is also called the final balance sheet because it is produced at the end of the period and is called the initial balance sheet because it will be used as the initial balance sheet for the next period's accounting cycle.
Thus has been explained about Definition of Service Company, Stages of Accounting Cycle & Explanation, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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