04 Accounting Process

Question 1

Steps or procedures used in recording transactions and preparing financial statements.

Answer 1

Accounting Cycle

Question 2

What are the steps in the accounting cycle?

Answer 2

1. Analyze business documents or transactions
2. Journalizing
3. Posting
4. Unadjusted trial balance
5. Adjusting entries
6. Prepare FS
7. Prepare closing entries
8. Prepare post-closing trial balance
9. Prepare reversing entries

Question 3

Which steps in the accounting cycle are optional?

Answer 3

unadjusted and post-closing trial balance, reversing entries and worksheet

Question 4

Pertain to original source materials evidencing a transaction.

Answer 4

Business or source documents (sales and purchase invoices, official receipts, debit and credit memos)

Question 4

Pertain to ledgers.

Answer 4

Books offinal entry

Question 5

Pertain to journals.

Answer 5

Books of original entry

Question 6

Process of recording transactions in the journal

Answer 6

Journalizing

Question 7

Each transaction is recorded in two parts (debit and credit)

Answer 7

Double Entry System

Question 8

Concepts followed by double entry system

Answer 8

Duality and Equilibrium

Question 9

Transactions are recorded through simple narrative

Answer 9

Single Entry System

Question 10

Types of ledger

Answer 10

General - all accounts in trial balance
Subsidiary - details of certain general ledger accounts (control accounts)

Question 11

Types of journals

Answer 11

1. General - transactions not recorded in special journal
2. Special - promote efficiency to record similar transactions

Question 12

What is included in:
Sales journal
Cash receipts journal
Purchases journal
Cash disbursement journal

Answer 12

sales - credit sales only
cash receipts - all cash receipts
purchases - credit purchases only
cash disbursement - all cash payments

Question 13

Transferring data from journal to appropriate accounts in the ledger

Answer 13

Posting

Question 14

Systematic listing of GL accounts

Answer 14

Chart of accounts

Question 14

Basic storage of information in accounting

Answer 14

Account

Question 15

Permanent accounts that are carried from one accounting period to another

Answer 15

Real accounts

Question 16

Temporary accounts closed at the end of the accounting period

Answer 16

Nominal accounts

Question 17

Accounts that represent those with real and nominal elements

Answer 17

Mixed Accounts

Question 18

Differentiate the two types of valuation accounts

Answer 18

Contra Accounts - deducted from related accounts
Adjunct Accounts - added to a related account

Question 19

List of GL accounts with their respective debit or credit balance

Answer 19

Trial Balance

Question 20

Errors not revealed by a trial balance

Answer 20

> omission of an entry
double posting
classification error

Question 21

Three types of trial balance

Answer 21

Unadjusted, adjusted, post-closing

Question 22

All adjusting entries involve _________________.

Answer 22

One balance sheet account and one income statement account

Question 23

Entries made at the end of every accounting period to split mixed accounts or bring accounts up to date.

Answer 23

Adjusting entries

Question 24

Methods of recording prepaid expense

Answer 24

Expense method - original payment is debited to an expense account Asset method - original payment is debited to an asset account

Question 25

Methods of recording unearned income

Answer 25

Income method - income account is credited for receipt of income Liability method - liability is credited for receipt of income

Question 26

Multi-column sheet of paper used in compiling and summarizing information necessary for preparation of FS

Answer 26

Worksheet

Question 26

Format of worksheet

Answer 26

Unadjusted TB Adjusting entries Adjusted TB Income statement Balance Sheet

Question 27

Entries made at the end of the accounting period after adjusting entries and preparation of FS to close all nominal accounts.

Answer 27

Closing Entries

Question 28

What concept is applied in closing the books?

Answer 28

Periodicity Concept

Question 29

Entries made at the beginning of the new accounting period to transfer all accrued and prepaid items established by adjusting entries to the nominal accounts

Answer 29

Reversing Entries