Explaining General accounting (part 1 )

In this series we will identify the importance of general accounting and its functional form with detailed explanation of   all the functions and entries accomplished  by general accounting department .

General accounting is the basis in any company for preparing the concluding accounts and presenting  the real financial status . Accounting programs , records and accounting methods differ in data input from a company to another . However they all share the same target which is concluding accounts and representing the actual financial status .

Generally speaking General accounting is number 1 in any financial administration and especially for large companies for many reasons :

1 – General accounting is  the theoretical and practical guide for the company .

2 – Any establishment should have accounting programs as the accountant records daily activities of the establishment divided into expenses and revenues as each activity requires records of a certain system to show the result of these procedures .

3 – General accounting is the mirror on which cost accountant works .

4 – Basic costs of any company depend on the adjustments accomplished by general accountings and the accuracy of the costs depends completely on the data provided by general accounting department .

5 – General accounting is the basis of concluding accounts preparation .

6 – General accounting  presents monthly entries for all activities during the month through which the budget is created .

Prices of accounting programs in Egypt and The Middle East :

The most important records in General accounting department :

First ; revenues of commercial activity or any other revenues :

Revenues are so important so the company uses accounting program and records to show the current activity revenues or any other revenues . 

There are revenues records that show :

1 – Cash  Sales  revenues : their accounting is recorded as follows :

Ps    Business       A                                      (PS  Private sector) 

To    sales  production  A

On payment the accounting entry is as the following :

  The bank  A

To      PS business A

2- The remaining  credit sales in the accounting entry :

As for credit sales, accounting entry is different :

   from       Clients    A

to     PS  business    A

On payment the accounting entry is 

From      bank  A

To      PS  business    A

All activities are recorded in clients record until the end of the year when the balance of each of them is calculated .

In he case of sales returns the accounting entry is :

From sales returns   A

TO    clients A 

Note :

Sales returns are on the debtor in trading and operating .

Clients’  accounts are  divided and copied  into two sides :

From :                                                       to

To sales production  A                         to bank         A

FROM   sales returns    A   

+ closing balance 

Important information:

Some companies don’t depend on selling their products but they buy some goods for the purpose of selling and the accounting entry will be :

From           PS A

to  Goods for sale    A 

ON payment :

From    bank A

To   PS  business   A

For credit sales 

From    Clients    A

To     Goods for sale  A 

ON payment 

From             bank    A 

TO                 CLIENT  A

Revenues may not be restricted to products or goods for sale but they can include some other kinds of revenues such as 

1- Weighing  to the others

Some companies have a big truck scale that is used to weigh for others for some money and the accounting entry is as follows :

From     Treasury   A 

 To  Sold services (truck scale )    A

2-Sell their production remnants

There are number of companies that tend to sell their production remnants   and the accounting entry is 

From        treasury    A 

To           Various (  remnants   )  revenues   A

3- Equipment rent for others :

The accounting entry is :

From      treasury   A

To     Various ( Equipment rent   )  revenues   A

4- Allowed discount in companies :

Allowed discount is decided in some  companies and the accounting entry is :

From     allowed discount    A

 TO     CLIENTS     A

In this way it is a deduction of clients’ debts and the allowed discount is opposed to the received discount .

A legal note :    In presenting their revenues , companies mustn’t show the operating and trade account but they only have to present the gains , loss balances and the budget in general .

In the next part we will explain expenses and revenues which is considered the most important in general accounting .