Question

Please discuss the steps needed to process a business transaction.

Answer 1

Steps required for a business transaction:

Step 1 - A business transaction occurs like issue of shares

Step 2 - Transaction is recorded in the books of accounts through a Journal Entry like Debiting the Cash account and Crediting the Common Stock account.

Step 3 - Journal entry is posted to respective Ledger Accounts like Cash Ledger Account and Common Stock Ledger Account

Step 4 - All Ledger Accounts are closed and their individual balances are transferred to Trial Balance.

Step 5 - If there are any adjustments then such balances are also transferred and the Adjusted Trial Balance is prepared

Step 6 - From the adjusted trial balance, the financial statements like Income Statement, Balance Sheet, Cash Flow Statement and Statement of Stockholders' Equity

Thus, these are the steps required for a business transaction.