What Are The Four Phases Of Accounting And Meaning?

Broadly speaking, there are four steps, or phases, which take place in accounting. These are:

• Identification and Record
• Sorting and Classification
• Summarizing and Presentation
• Interpretation

In the first stage, the accountant will need access to all financial records and paperwork the business or individual. This may include receipts, invoices and vouchers. From these articles, the accountant can create a log containing every financial transaction of the business or individual.

From this log, the accountant can get an idea of how much money is being spent and earned. An accountant is not permitted to create and log transactions which have not happened. Also, an accountant should not omit delete records from the log. Instead, they should make amendments to records in the log, along with the reason why the amendment was needed.

In the second stage, all the transactions in the log must be sorted and categorized into different groups. First of all, as stated above, the accountant must identify whether each transaction represents income or expenditure.

After this has been identified, the account must link the transaction with the appropriate field within the business or the individual's life. For example, within the expenditure category, you may have groups for expenses such as travel, marketing and production.

In the third stage, the accountant must communicate a summary of the figures they have found, and how they found them. Computer software may be used to create texts such as graphs, charts, spreadsheets and invoices, as well as having the information clearly presented in a written article.

The final stage requires that the account works closely with the business or individual in order to make them more efficient and increase their profit. For example, there may be particular areas of expenditure which the account feels are too high, and need to be reduced. They will then work with the company or individual in order to come up with methods and processes to reduce these areas of expenditure.

The four phases of accounting are as follows:

• Recording

Recording is the first phase of accounting in which all monetary information is recorded in order to make a record that can be used for various needs. Accounting records are used for taxes, budgeting, reporting and business plans.

Without recording the monetary transactions it will be hard to determine where a business or person has spent their money. Accounting is used in personal and business situations.

During the recording phase, transactions have to be classified into categories. This is for tax purposes. In taxation there are different categories that can provide savings.

• Classifying

In order to determine how much one spent in each of the categories one has to classify the records. For example in a business, office supplies can be deducted from the taxes. Dining and entertainment can also be used as a deduction.

• Summarizing

After the recording phase and the classification stage comes summarizing the various categories into a linear sheet of information that is easier to read. From this one can discover how much was spent, what was kept, what was paid out, where and other information.

The summarizing stage makes the interpretation of the data that much easier. One has to be able to interpret the data to find out what may be changed, what has changed, and where the person or company is going financially. Often in the interpretation things such as where one can budget better or where one needs to find money for the next year can be found.

• Interpreting

If you look at it from a business standpoint there may be equipment that is needed so interpreting the data can help find the extra money for the equipment. It can also be used as a phase to determine stock information.

The four phases of accounting are recording, classifying, summarizing and interpreting. Some people who work in finance often say that communication, although it is not officially one of the accounting phases, it should still be considered an important step. This means that good communication must be observed during all four phases of the accounting cycle to help things run as smoothly as they possibly can.

• The first phase of accounting is recording which can also be called bookkeeping. During this phase, any financial transactions that have taken place over the financial period, whatever time frame that may be, must be chronologically recorded in a systematical way. The accounting period can either be each month, quarterly or at the end of every year.  The correct books and databases must also be used.
• The second phases of accounting is classifying, which means that all financial items and transactions must be sorted, organized and grouped under certain names, categories and account depending on the nature of the transaction for example, travel expenses.
• The third phrase is summarizing means that all data has to be summarized at the end. It is essential that this summarized data is easy to understand for people who work within the accounting department and for people who are not, as these files may be read by people from all departments within the company. Visual aids such as charts and graphs may also be used alongside the data presented.
• The final stage of accounting is interpreting which is where people look at the data that has been recorded, classified and summarized and they interpret that data. By doing this, the people examining the data will be able to reach informed decisions about the financial status of a company. This data will also be used to come up with future financial plans for the business.

RecordingRecording or bookkeeping is a basic phase of accounting. It is where all financial transactions are recorded in a systematical and chronological manner in appropriate books or databases. Accounting recorders are the documents and books involved in preparing financial statements, these include records of assets, liabilities, ledgers, journals and other supporting documents such as invoices and checks.

Classifying
Classifying involves sorting and grouping similar items under the designated name, category or account. This phase uses systematic analysis of recorded data in which all transactions are grouped in one place. For example, "food expenses" might be a category that accountants use to classify expenses relating to company events or travel related meetings etc. A "ledger" is the book in which classifications are recorded.

Summarizing
This refers to the  summarizing of the data after each accounting period specific to a particular company, such as a month, quarter or year. The data needs to be presented in a manner which is easy to understand and is generally used by both external and internal users of the accounting statements. Graphs and other visual elements are often used to complement the text data and can be used in meetings, to relate information via in house intranets or post company information.

Interpreting
Interpreting in the accounting process is concerned with analyzing financial data, and is a critical tool for decision-making and strategic management. This final function interprets the recorded data in a manner which allows end-users to make meaningful judgments regarding the financial conditions of a business account, as well as the profitability of business operations. This data can then be used to prepare future plans and frame policies to execute financial plans.

1. Data collection
2. Data input
3. Data processing and storage
4. Data output

Recording, classifying, summarizing, and interpreting.

The data processing cycle is the order in which data is processed. There are four stages;

1. Data collection
   
2. Data input
   
3. Data processing and storage
   
4. Data output

They are:

1. Input—entering data into the computer.
   
   
2. Processing—performing operations on the data.
   
   
3. Output—presenting the results.
   
   
4. Storage—saving data, programs, or output for future use

The four phases of accounting, but there are five phases and they are:

1)  Identify the transaction or other recognizable event.
2)  Prepare the transaction's source document such as a purchase order or invoice.
3)  Analyze and classify the transaction. This step involves quantifying the transaction in monetary terms like dollars and cents, also identifying the accounts that are affected and whether those accounts are to be debited or credited.
4)  Record the transaction by making entries in the appropiate journal, such as the sales journal, purchase journal, cash receipt or disbursement journal, or the general journal.  Such entries are made in chronological order.
5)  Post general journal entries to the ledger accounts.

Classifying

Recording

Meaning of recording, classifying, summarizing and interpreting

Phases of accounting

Recording

Recording
classifying summarizing
interpreting

Presenting phases of accounting

Meaning of recording in phases
of accounting