Flowcharts are useful for showing how the steps in a business process fit together. When used to document the accounting cycle, they serve not only as a convenient checklist to make sure your employees complete each step in the full accounting cycle every month, but they also help you analyze and improve accounting workflows. Once you understand which symbols to use where and what information each one requires, an accounting process flowchart is not difficult to create.
Understand Flowchart Symbols
Flowchart symbols show the steps, decisions and tasks involved in the accounting cycle. Although you can use any symbol to depict each of these, many people use standard symbols. For an accounting process flowchart, these include ovals, rectangles and parallelograms, which are flat shapes with opposite sides parallel and equal in length. Also useful are arrows that signal the direction in which the accounting process flows. As the website Mind Tools explains, ovals most often depict the beginning or the end of a process, rectangles identify specific tasks and their instructions or directions and parallelograms classify accounting outputs.
Create the Flowchart Structure
The accounting cycle is a set of 10 steps that take place in the same order every accounting period. In the order in which each step occurs, the accounting cycle consists of identifying transactions, analyzing transactions, making journal entries, posting entries to the ledger, calculating a trial balance, making adjusting entries, calculating an adjusted trial balance, preparing financial statements, transferring balances in temporary accounts via closing entries and calculating an after-closing trial balance. Identify each main step within an oval and use directional arrows to create a vertical flowchart structure.
Add Task Details
Conduct a task analysis to identify individual tasks in each step of the accounting cycle. The more detail you provide, the more useful the chart will be. For example, instead of using a single rectangle that says “record journal entries as debits or credits,” list each step or provide directions for completing this task in its own rectangle. For steps that produce output, such as preparing financial statements, identify the output using parallelograms, place these to the right of the corresponding rectangle and connect them with directional arrows. Repeat this step until the flowchart is complete.
Test and Verify
Once the flowchart is complete, Mind Tools recommends that you verify the information and test it for accuracy. One way to accomplish this is to ask accounting employees to review the chart and test it by following the steps exactly as they’re presented. This also is a good time to analyze the accounting cycle to improve efficiency and internal controls. Identify both unnecessary and redundant steps, as well as steps you should include. Look to see whether accounting procedures provide adequate internal control, such as information security and separation of duties.
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