Describe the Four Components Found in All Financial Reporting Systems

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The Answer is All financial reporting systems are composed of four components:
i) Source documents and transactions. Source documents, whether paper or electronic, are generally generated by accounting transactions.. Some examples include: sales order, bill of lading, sales invoice, picking ticket, purchase order, requisition, etc.
ii) Journals. Transactions are initially recorded in journals, otherwise known as books of original entry. Journals include a general journal or a specific journal, such as a sales journal, cash disbursements journal, purchases journal or cash receipts journal which have large numbers of transactions of a particular type.
iii) General and subsidiary ledgers. Ledgers aggregate the transaction activity on an account basis and indicate the current balance at a point in time. Ledgers include a transaction summary for all authorized accounts. In a manual system, ledgers will indicate the final balance of each account after all current journal entries are posted. For automated systems, ledgers are the summation of master files organized by account balance. The ledger utilized most by auditors is the general ledger, which summarizes activity for all accounts contained in the chart of accounts at a point in time
iv) Financial statements. Financial statements consist of line items that summarize related account balances conditional on account type, materiality, and GAAP requirements.

Describe the Four Components Found in All Financial Reporting Systems

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Describe the Four Components Found in All Financial Reporting Systems

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