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There are a series of steps that are to be followed to record any transaction in accounting. The entire steps are done with the main motive of preparing financial statements of the entity and calculating the profits and the financial position of the business after regular intervals of time. 

Identify the transaction:

The first and foremost step is to identify the business transaction and categories them into monetary or non-monetary, personal or business. In accounting, only those business transactions which are monetary in nature are recorded. 

Recording the transaction:

After identifying next is to record the transaction by creating the Journal entry for every accounting transaction. A business can choose any policy of recording transactions i.e., accrual basis or cash basis of accounting. 

Posting the transaction:

After identifying and recording the transaction in the books of Journal, the ledger posting is done. In ledger posting, individual accounts are prepared to determine the balance of each account individually. 

Preparation of Trial Balance:

Adjustments entries are passed after ledger posting which helps in preparation of trial balance. This step is done to check all the credits are equal to the debits after adjustment entries are done.

Preparation of final accounts:

This is the main step in the accounting process where balance sheet and financial statements are prepared to know the actual financial position, the profitability position, and the cash flow position of the business.

Closing entries:

Lastly, closing balances are transferred to the income statement and then to the permanent account. 

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Many businesses use three separate types of accounting to track its income and expenses which are cost, managerial, and financial accounting. 

Cost accounting 

Cost accounting is done by business in order to determine its production cost. In this accounting they see how much they spend to purchase the supplies and labor needed to create its products. This is done to compare the production cost against the profit the company earned by selling the products. This accounting is done to establish a budget for future projects of a similar nature.

Managerial accounting 

As the name suggests, this accounting is done  to help the managers to make the most appropriate business decisions and manage costs. In this accounting, financial documents are prepared for management and other higher-level staff for forecasting purposes and managerial decisions. 

Financial accounting 

This accounting is undertaken to prepare final accounts which are of great use to external parties like investors, employees, government etc. . The most common documents which are obtained are balance sheet, income statement, and statement of cash flows. These documents help investors understand the financial strength of the company to decide whether to make the investment or not. They help the government in deciding taxes and giving subsidies.