ACCOUNTING PROCESS: CHARACTERISTICS, STAGES AND IMPORTANCE - CULTURE VOCABULARY - 2025

The accounting process is the cycle that occurs between the occurrence, registration and processing of financial operations carried out in a company.

That is, it is a sequence of activities that leads to a detailed record of how goods and services are received, charged for and paid for in an organization.

This record is made in the accounting books or notebooks. It is a process that occurs in stages and is constantly restarted. It compiles financial information that is then presented in the form of reports called financial statements.

But the cycle does not end until the presentation of those financial statements, but starts over from there. The frequency of financial reports depends on the nature or size of the business. However, it is normal for them to be quarterly, semi-annual and annually.

Stages of the accounting process

Among the stages of the accounting process are:

Identification and analysis of the transaction

The type of operation being carried out is defined using the source documents: invoices, purchase orders, contracts, etc.

These source documents should be original, since they serve as support for the recorded transactions.

Those transactions must be analyzed before being loaded into the system to determine the account to which they belong and the actual amount to be recorded.

Only accounting transactions that belong to the company are entered.

Identify accounts

In the accounting database or accounting system that a company uses, there is a list of accounts or concepts in which the entries will be included.

It is important that these accounts are properly detailed and specific enough to reflect, without question, the nature of the transaction.

At this time it is decided which will be the accounts in which the transaction will be registered.

Transaction record

The transaction or journal entry is noted as it occurs, resulting in chronological order.

To make these annotations, the double entry accounting system is generally used, in which the debited accounts and the credited accounts are reflected.

There are special books in which transactions that are repeated with a certain frequency are recorded.

Post publication

Entries or transactions are posted to individual ledger accounts, with debits on the left and credits on the right.

Each account is detailed in the ledger.

Posting of balances

It is the preliminary balance of all the accounts; balances are calculated and debit and credit balances are totaled.

If the result at the end of these two columns is the same, then the balance is correct.

Profit and loss entry

It is the entry of the totalization of profits and losses of the business.

Preparation of the trial balance

After determining the balances of the accounts that are reflected in the general ledger, we proceed to verify the accuracy of the records.

With this document, the effects of adjustments can be relocated, before posting them to the accounts.

Adjustment analysis

At this time the adjustments are noted in the journal, based on the data collected in the trial balance.

Once this step is completed, these adjustments are passed to the general ledger. In this way, the accounts will show correct and updated balances.

Presentation of financial statements

The amounts in the various registered accounts are combined and presented in financial statements.

That is, the information in the worksheet (or trial balance) is regrouped, and they are prepared: the general balance sheet, the income statement, the cash flow statement, etc.

Accounting closing

In this phase, actions are carried out to close the accounting cycle in a given financial year.

Among the operations that are executed in this phase are:

• Accounting for changes in inventories
• Accounting accrual
• Accounting for provisions and impairment losses
• Accounting for depreciation

At the closing, the fiscal year ends on the books to serve as support for the next fiscal year. At this stage, journal entries are posted to close temporary capital accounts.

This information then goes to the general ledger, where the profit and net loss go to the capital account. It is the record of the end of the fiscal year, in which all accounts (creditors and debtors) must have a null balance.

Post-closing trial balance

It is a step after the closing of the nominal accounts. It is a procedure that ensures that the general ledger is balanced for the beginning of the next accounting period.

It is a balance sheet that has Assets, Liabilities and Capital.

Final balance sheet

The final balance sheet is the process involved in taking the accounts to the general ledger. Credit accounts are placed in the asset column, and duty accounts in the liability column.

This will be the balance that will be taken into account to make the initial balance sheet for the following financial year.

Importance of the accounting process

The accounting process is the only reliable way to determine the profitability of a company. Only by following these steps will you be able to see the detail of the profitability of the investment that is being made in a certain business.

Likewise, it is what will allow having data to make correct decisions about the operation of the business, such as which items need capital injection or which should be discarded.

On the other hand, it also has legal advantages, because it allows you to keep up-to-date information that may be required by government entities.

The accounting process and its automation

Over the years, most tasks in a company have been affected by automation in different ways. In the case of accounting, something very different does not happen.

When computing became a popular activity, around 1981, accounting information systems were integrated into databases.

According to the size and nature of the company, its leaders decide the level of systematization they will use in their accounting.

Some of the advantages of automating the accounting process are:

Simplicity

Most of the software on the market is designed so that the accounting team can easily and quickly adapt to the system.

In addition, they include quick ways to correct probable mistakes that may be made.

Speed

It is one of the most obvious benefits of an automated system because it allows you to locate entries, accounts or any other accounting data, in a matter of seconds.

This also comes with a burden of convenience, since it eliminates the need to carry ledgers or folders.

Ease of supervision

Accounting automation allows having, when required, the financial picture of the business.

Likewise, the behavior of each account can be checked and contrasted at any time of the financial year.

Backups

Having the automated accounting system allows you to have copies of all the information more quickly and easily than having it manual would mean.

Like everything, this automation also involves certain risks, among which we can mention:

Computer viruses

Computer viruses are a risk to any electronic device or system.

Accounting systems are also susceptible to being penetrated by a virus, which makes it mandatory to protect them with strong security measures.

This fact reaffirms the enormous advantage of having backup and backup copies.

Information theft

The theft of information through the actions of hackers is another natural risk of these systems.

Accounting systems software

Some IT tools to carry out the accounting process can be:

Of the sun

It is a package with applications to keep the accounting: treasury, payroll, tax returns, etc.

Loggro

It is a software created by the PSL company that allows the administration of accounting, inventories, sales, customers, suppliers and their invoicing, all this supported in the cloud.

So you can have access to information from anywhere at any time.

Contalux

It is a software that allows to pass the information of the books to an Excel sheet.

Secop

It is software that allows meticulous control of inventories, making it useful for companies with warehouses.

It also enables the registration of sales and purchases.

Alvendi

It is a software very similar to Secop, although with a simpler interface.

Moyex

It is a software that allows you to control orders with a high level of detail.

There are more specific software such as Prestacob, which allows you to make loans, or Factool, to register, print and consult the invoices issued by a company.

As seen, it is a key process within business management that has evolved over time and can be as sophisticated and complex as the size and nature of the organization requires.

The accounting process is a way of ensuring the proper functioning of a business and its stages and modes are adapted to the organization.

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