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Accountants use a mix of technical and soft skills throughout the course of the workday. Technical accounting skills are required for accurate recording of financial information and recommending courses of action to management. Technical skills include journalizing financial transactions, creating financial statements and reconciling account balances.
Journalizing Financial Transactions
Accountants record financial transactions through the use of journal entries. Every journal entry includes both debits and credits and must balance. Journal entries are recorded throughout the month. At the end of the month, the accountant analyzes each account and records an adjusting entry to recognize income earned or expenses incurred during the period that are not recorded in the accounting records. After the financial statements are completed, the accountant records the closing entries to clear out the balances of the revenue accounts, expense accounts and owner’s drawing.
Creating Financial Statements
Accountants create financial statements which are used by investors, creditors and management. The primary financial statements consist of the balance sheet, the income statement, the statement of owner’s equity and the statement of cash flows. Accountants create these statements by correctly categorizing each account and knowing which financial statement each account is reported on. Financial statements follow a standard format and the accountant needs to know the proper format to use. Assets, liabilities and owner’s equity accounts are reported on the balance sheet. Revenues and expenses are reported on the income statement. The statement of owner’s equity reports activity in the owner’s capital account. The statement of cash flows details cash transactions for the period.
Reconciling Account Balances
Accountants reconcile account balances to verify their accuracy and correct any errors. The accountant analyzes account transactions for reasonableness. Unusual transactions are investigated further to determine if they were recorded correctly. The accountant compares account balances recorded on the balance sheet to source documents. If the balances do not match the source documents or if a document looks suspicious, the accountant investigates the difference. The accountant documents any discrepancies and corrects inaccurate entries.