Service Company Accounting Cycle

Service Company Accounting Cycle is not much different from trading company accounting, but what distinguishes it is the absence of special journals and inventory auxiliary books, in accounting services firms.

below Example illustration of the accounting cycle of a Service company:

The accounting stage is the procedure for recording transactions so that they become financial statements. This is called the term as an accounting cycle. The accounting cycle can be said in the order of each transaction process event which is then analyzed so that it results in the formation of a financial report.


there are three stages in the accounting cycle:

1. Recording Phase

2. Sumarizing Phase

3. Reporting phase

     RECORDING STAGE

Service company transactions are initial information that must be recorded and processed as a basis for making financial statements. the steps taken in the company's recording stage include:

    Preparing document sources / proof of transactions Proof of transactions comes from checks, notes, invoices, memos, and receipts that are received every time a transaction or event occurs in the company.
    From the source of the transaction, then an analysis is done to the General Journal.
    After the analysis to the General Journal is complete, then it is posted into the ledger.

The process of moving from journal to ledger is called "Posting"

In the ledger, accounts are grouped according to their class. As:

     Balance sheet account or real account: that is the account reported on the balance sheet for a certain period. Balance sheet accounts include: Assets (Assets). Debt, capital and prive (liabilities).
     profit or loss account or Nominal Account: that is the account which is used as the basis for the calculation of the income statement. For example income and expenses.

STAGE OF EXTENSION

After the recording phase above has been completed, the next step is the pengikhtisaran stage. The order of the pengikhtisaran stage is as follows:


    Prepare a trial balance. The balance sheet data comes from the balance of the general ledger. This balance sheet is made as a first step to compile a working sheet (Work Sheet)
    Adjusting entry. Sometimes when a company records it, there are accounts that have not been recorded. This is where the recording is done to find out the real account balance or balance sheet account and profit and loss account actually.
    Working paper or Balance Sheet is a tool to make financial statements of transactions that occur within the company during an accounting period. Because it functions to know the development of the company, the working paper contains all the reports that occur including: Balance of account, AJP, NSD, Profit and Loss and Balance Sheet.
     After completing the working paper, the next step is to make a closing journal. This closing journal is where to cover nominal, prive, and profit-loss accounts so as not to recalculate transactions in the next period.
     The balance sheet after closing, the purpose of which is to determine whether the account in the ledger has been balanced to start activities in a certain period, this step relates to a reversal of a particular adjustment paragraph (Reversing Journal)

    REPORTING STAGE

The last is the reporting phase. This stage is the last in the accounting process. As for what is included in this reporting phase are: Financial Reports.

The final result of the accounting process is the Financial Report.

The financial statements have elements, namely:

     Income statement
     Statement of changes in capital
    Balance sheet

Usually companies know the development and performance of the company seen from their financial statements. The main objective of parties in need of accounting is as a basis for consideration for making economic decisions in a company.


The contents of the financial statements include:


1. Income Statement

The income statement contains all nominal accounts, namely income and expenses. From the calculation between the income and the expense of the account obtained the company's profit or loss. Nominal accounts are usually called temporary accounts.


2. Capital Change Report

The report on changes in capital has elements, namely initial capital, residual profit or loss of the company, prive, and the company's final capital, affecting the position of capital.


3. Balance Sheet

A balance sheet is a report that contains the position of assets, debt, and capital of the company at a certain time. The balance sheet contains real corporate accounts.