The Accounting Process - Six Steps

Interpreting

Deciding the meaning and importance of the information in various reports. This may include ratio analysis to help explain how pieces of information relate to one another.

Recording

Entering financial information about events into the accounting system. Although this can be done with paper and pencil, most business use computers to perform routine record-keeping operations

Analyzing

Looking at events that have taken place and thinking about how they affect the business

Classifying

Sorting and grouping similar items together rather than merely keeping a simple, diary-like record of numerous events.

Reporting

Telling the results. In accounting, it is common to use tables of numbers to report results.

Summarizing

The aggregation (collection of related items) of many similar events to provide information that is easy to understand.

The Six Major Steps of the Accounting Process

The steps of the accounting process are analyzing, recording, classifying, summarizing, reporting, and interpreting. Computers are often used in the recording, classifying, summarizing, and reporting. Whether or not computers are used, the accounting concepts and techniques are the same.