The accounting process consists of two interrelated parts: 1) the recording phase and 2) the summarizing phase. The recording phase is concerned with collecting of information about economic transactions and events. For more businesses, the recording function is based on double-entry accounting procedures. In the summarizing phase, the recorded information is organized and summarized, using various formats for a variety of decision making purposes. There is an overlapping of the two phases, since the recording transactions is an ongoing activity that does not cease at the end of an accounting period but continues uninterrupted while events of the preceding period summarized. The recording and summarizing phases of the accounting process will be quickly reviewed in this blog.
Recording Phase: The recording phase is the accurate financial statements can be prepared only if transactions have been properly recorded. A transaction is an event that involves the transfer or exchange of goods or services between two or more entities. Examples of business transactions include the purchase of merchandise or other assets from suppliers and the sale of goods or services to customers. In addition to transactions, other events and circumstances may affect the assets, liabilities, and owners’ equity of the business. Some of these events and circumstances also must be recorded. Examples include the recognition of depreciation on plant assets, a decline in the market value of inventories and investments or a loss suffered from a flood or an earthquake.
As indicated, the recording phase involves analyzing business documents, journalizing transactions, and posting to ledger accounts.
Summarizing Phase: As noted earlier, the objective of the accounting process in Medical billing and coding is to produce financial statements and other reports that will assist various users in making economic decisions. Once the recording phase is completed, the date must be summarized and organized into a useful format. The remaining steps of the accounting process are designed to accomplish this purpose.
