The Recording Process of The Business

The recording system consists of the whole accounting cycle starting with the identification of
source documents and the recording information contained in the source documents. It ends
with the preparation of financial statements which will then be analysed for users, to be more
meaningful to them.

1. Source documents
Source document is the original document record containing the details of a business
transaction. It captures the key information about a transaction, such as the date, names
of the parties involved, amounts paid, and the substance of the transaction. The
accounting process of Ombak Barbershop starts with the recording of business
transactions, the details of which are taken from ‘source documents’. The source
documents of this company are of different types depending on the types of transactions.
Examples of their source documents are invoices, bills, receipts, debit notes, and credit
notes.

2. Books of prime entry / Journals

Once the source documents are analysed, the information is transferred first to journals
which are also known as books of prime entry before posting the ledgers are done. The
journal is just like a diary whereby information such as the date, details and amounts
regarding transaction is recorded. The types of journal in accounting is general journal,
purchase journal, sales journal, cash receipts journal, cash payment journal, return
outwards journal, and return inwards journal. Ombak Barbershop practised recording
the event occurs in appropriate journal because they appointed an accountant.

3. Ledgers
After Ombak Barbershop recorded the transactions into the journals, the total will be
posted to the appropriate accounts in the ledgers. This process is known as posting. A
ledger is a book, set of loose cards or file that contains accounts. There are three types
of ledgers are the purchases ledger, sales ledger and general ledger. The owner of
Ombak Barbershop, Mr. Husni assisted by his accountant record the business
transaction in a proper ledger.

4. Trial balance
 At the end of the month or at the end of the accounting period, Ombak Barbershop will
make a trial balance to check whether the transactions are recorded correctly or not. If
the trial balance is not recorded correctly, the accountant of this company will do an
adjustment to correct the error. Ombak Barbershop always prepares a trial balance
monthly. They do records daily transactions of the business in the appropriate journal
and also ledger. Ombak Barbershop have a trial balance every month.

5. Adjusted entries
Adjusted entries can be explained as the journal entries used to identify income or
expenses that occurred but are not accurately displayed in the business records. It can
be use at the end of an accounting period to make sure debits and credits are balance,
such as in accruals and prepayments, depreciation and inventory adjustments. Mr.
Husni said that they do adjusted entries monthly.

6. Adjusted trial balance

An adjusted trial balance is a listing of all company accounts that will appear on the
financial statements after month-end adjusting journal entries have been made.
Adjusted Trial Balance. An adjusted trial balance is prepared after adjusting entries are
made and posted to the ledger. This is the second trial balance prepared in the
accounting cycle. Its purpose is to make sure that the transactions are recorded. Ombak
Barbershop always do adjustment for trial balance monthly.

7. Final accounts
The financial statement of the business can be used as a measurement of the business’s
performance after the operations either it was a success or failure. Ombak Barbershop
practises this statement monthly. Then, they will know their profit or loss according to
the statement of profit or loss and statement of financial position.

8. Reversing entries
The last step in the accounting cycle is reversing entries. Reversing entries or known as
reversing journal entries, used to reverse or cancel out any adjusting journal entries
made from the end of the previous accounting period. It was an optional journal, but it
essential in keeping track of the expense so that the transaction will be allocated
properly between the two periods. Ombak Barbershop practises these entries in the
business every month.