The information accounting structure is designed to collect, store, and develop transaction data into complete financial information, which is then disseminated to the users. The accounting system varies from business to business, depending on the nature and size of the company, the volume of transactions, and management requirements ("Accounting Information Systems - Functions and Parts of the System", 2020) . The accounting information system uses the basis of the double-entry to record and process business transactions; the process is followed for the entire accounting cycle—the accounting cycle us composed of sequential accounting procedures that take place every accounting year (Kieso et al., 2019) . All sales abide by a double-entry structure where a debit record has a conforming credit record. The fundamental guideline of an accounting system is the equation;
Assets = Liabilities + Owners’ equity.
For assets and expenses accounts, a rise is documented by debit entry, and a reduction is noted through a credit entry. For revenues, liability, and equity accounts, a rise is noted via a debit entry, while a reduction is noted through a debit entry. For instance, the purchase of company car by cash $5000 is recorded as follows;
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Debit Motor vehicle account (asset account) $5000 increase in assets
Credit Cash account $5000 decrease in assets
The period begins by posting the transaction in the appropriate journals, which is posted to the ledger. An unadjusted trial balance follows as the preparation of adjusting journal entries is done, after which are displayed to the trial balance to reflect the adjusted trial balance. The financial reports are organized based on the adjusted trial balance (Kieso et al., 2019) . The final procedures that are optional include closing the trial balance and preparation of the reversing journal entries.
The parts that challenged me to understand are the adjusting entries for deferrals, especially the unearned revenues, depreciation adjustment, and accrued taxes. Unearned revenues are payments received by the company for services not offered, such as a deposit for work to be delivered in the future. Unearned revenue is a liability to the receiving account and is adjusted by debiting a liability account and recognizing the income by crediting the revenue account. Depreciation is the allocation of a portion of the asset to expense account each period for the entire life of an asset. It is a requirement by GAAP and conforms to the expense recognition principle. Accrued revenues refer to the earned revenues that have been received by the company, such as interest income. It arises because it is not possible to recognize gained interest daily.
References
Accounting Information Systems - Functions and Parts of the System . Accountingedu.org. (2020). Retrieved 18 June 2020, from https://www.accountingedu.org/accounting-information-systems.html
Kieso, D., Wygandt, J., & Warfield, T. (2019). Intermediate Accounting (17th ed., p. Chapter 3). WILEY.
