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Modern accounting system

Modern accounting system is considered to be a seven-step cycle. The first three steps fall under the bookkeeping function, such as:1) the systematic recording of financial transactions; 2) the transferring of the amounts from various journals to general ledger; 3) the drawing up of the trial balance.

Record keeping of companies is based on a double-entry system which doesn’t mean that the same transaction is entered twice, it means that the same amount of money is always debited to one account and credited to another account, each record having its own effect on the whole financial structure of the company.

In the second step in the accounting cycle, the amounts from the various journals are usually monthly transferred to the company’s general ledger – a procedure called posting. Posting data to the ledgers is followed by listing the balances of all the accounts and calculating whether the sum of all the debit balances agrees with the sum of all the credit balances. This procedure known as the drawing up a trial balance and those that follow it usually take place at the end of the fiscal year. By making a trial balance, the record-keeping accuracy can be checked. The trial balance having been successfully prepared, the bookkeeping portion of the accounting cycle is completed.

THE LANGUAGE OF ECONOMICS

In reading about economics and economic problems, you will come across a number of new words and phrases. This is not surprising, since almost every activity has its own vocabulary, which, once you learn it, adds to your enjoyment of the activity. To help you understand the special vocabulary of economics, we shall present a list of each of these new terms at the end of each part.