The accruals and cash basis of accounting are two different methods of preparing financial statements. A business can calculate information relating to cash receipts and payments from it’s accrual based accounting system using accrual to cash conversion formulas.
Internal controls for accounts receivable are used to reduce the risk of fraud and error in the accounts receivable process. The purpose of the accounts receivable internal control checklist is to ensure that valid sales invoices are properly recorded and that customers pay promptly.
The accounts payable control account is an account in the general ledger which maintains summary postings relating to accounts payables. The account, which is sometimes referred to as the purchases ledger control account, is used to allow the detail of supplier transactions to be kept in a separate subsidiary personal account ledger which is not part of the double entry bookkeeping system.
The accounts receivable control account is an account in the general ledger which maintains summary postings relating to accounts receivables. The account, which is sometimes referred to as the sales ledger control account, is used to allow the detail of customer transactions to be kept in a separate subsidiary personal account ledger which is not part of the double entry bookkeeping system.
Accounting transaction analysis is part of the accounting cycle, and is the name given to process involved in using information from accounting source documents to firstly identify whether the transaction is an accounting transaction, and then applying the basic bookkeeping rules of debit and credit to break down the transaction into its component parts.
Financial statements are multipurpose documents used by many different parties for different reasons. For this reason financial statements need to be based on a generally agreed accounting framework or structure so that all parties understand how they are produced. Accounting assumptions can be considered to be the foundations on which the framework is based.
When a business has only a small number of accounting transactions then the double entry bookkeeping postings can all be maintained in a single ledger.
As the business expands the number of transactions and accounting staff increases and it becomes impractical to maintain one ledger due to its large size, and the problems of access to the ledger by multiple staff.
The solution is to sub-divide the ledger by accounting function into sales, purchase, cash book, and general ledgers.