#3.3 : Accounting Cycle - Journal, Ledger & Trial Balance

Question 1

What is an Accounting Cycle?

Answer 1

It represents the steps or procedures used to record transactions and prepare financial statements. The accounting cycle implements the accounting processes of identifying, recording, and communicating economic information.

Question 2

1. Identifying and analyzing business documents or transactions

Answer 2

This is the process of identifying and analyzing the transactions to be recorded through the business documents. The accountant gathers information from source documents and determines the effect of the transactions on the accounts.

Question 3

2. Recording transactions in the journal

Answer 3

This is known as journalizing. The identified accountable events are recorded in the journals.

Question 4

3. Posting journal entries to the ledger

Answer 4

This is known as posting. It is the process of transferring the information found in the journal into the book of final entries known as the ledger.

Question 5

4. Preparing the trial balance

Answer 5

The trial balance is a list of accounts found in the ledger together with the account’s balance or total. This is proof that for every debit, there is a corresponding credit. Hence, it is also a proof that the ledger is in balance.

Question 6

5. Preparing the adjusting entries

Answer 6

The accounts are updated as of the reporting date on an accrual basis by recording accruals, expiration of deferrals, estimations, and other events often not signaled by new source documents.

Question 7

6. Preparing the worksheet

Answer 7

The worksheet is a common tool used by accountants to assemble on a sheet of paper all the information needed to prepare the financial statements, adjusting entries, and the post- closing trial balance.

Question 8

7. Preparing the financial statements

Answer 8

These are the means by which the information processed is communicated to users.

Question 9

8. Closing the book

Answer 9

Closing entries are prepared at the end of the accounting period to update the owner’s capital account. This will also eliminate the balances of the nominal accounts so that they may be ready for the next period.

Question 10

9. Preparing the post-closing trial balance

Answer 10

The equality of debits and credits are again rechecked after the closing process.

Question 11

10. Recording of reversing entries

Answer 11

Reversing entries are prepared to simplify the accounting process. The adjusting entries are simply reversed on the first day of the accounting period. Not all adjusting entries are reversed, only accruals and deferrals that use the nominal balance.

Question 12

10. Recording of reversing entries

Answer 12

Reversing entries are prepared to simplify the accounting process. The adjusting entries are simply reversed on the first day of the accounting period. Not all adjusting entries are reversed, only accruals and deferrals that use the nominal balance.

Question 13

It is a chronological record of events or business transactions showing all the effects of each transaction in terms of debits and credits.

Answer 13

Journal

Question 14

What is journalizing?

Answer 14

After an accountable event is identified and analyzed, the second step is to record it in the journal by means of a journal entry.

Question 15

Journal entries are recorded in the journal ______________.

Answer 15

chronologically

Question 16

Under the double-entry system, each transaction is recorded in the journal in two parts-

Answer 16

debit and credit

Question 17

Debit and credit account format in a journal entry

Answer 17

Write the debit account on the extreme left of the first line and indent the credit account half-inch on the next line.

Question 18

Short description of the transaction format

Answer 18

Whe explanation describing the transaction is written on the extreme left of the next line below the credit.

Question 19

When to write the Posting Reference?

Answer 19

Write the corresponding account number here once the entry is posted. However, it is left blank until the posting has been done.

Question 20

A journal entry may have one of the following formats:

Answer 20

1. Simple Journal Entry – one that contains a single debit and a single credit element. The illustrated format above is an example of a simple journal entry.
2. Compound Journal Entry – one that contains two or more debits or credits.

Question 21

It is the group of accounts used by the company. It is the book of final entry.

Answer 21

Ledger

Question 22

The accounts in the general ledger are classified into two general groups:

Answer 22

1. Balance sheet or real accounts (assets, liabilities, and owner’s equity)
2. Income statement or nominal accounts (revenue and expenses)

Question 23

While the journal is chronologically arranged by date, the ledger is organized by ________.

Answer 23

account

Question 24

It is a list of general ledger accounts and their balances. It is prepared to check the equality of total debits and total credits taken from the ledger.

Answer 24

TRIAL BALANCE

Question 25

TYPES OF TRIAL BALANCE

Answer 25

1. Unadjusted trial balance – this is prepared before adjusting entries are made.
2. Adjusted trial balance – this is prepared after adjusting entries but before the financial statements are prepared.
3. Post-closing trial balance – this is prepared after the closing process.

Question 26

The following are the steps in the preparation of the trial balance:

Answer 26

1. Make a listing of all account titles.
2. Get the account balance of each ledger account and write them under their corresponding debit or credit column.
3. Foot or add the debit and credit columns of the trial balance.
4. Check whether the debit totals and credit totals are equal.

Question 27

It is committed when the number of digits in an amount is incorrectly increased or decreases or when a decimal point has been moved or misplaced.

Answer 27

Transplacement or Slide error

Question 28

It occurs when digits in an amount are interchanged.

Answer 28

Transposition error

Question 29

The heading of the trial balance consists of the following:

Answer 29

1. Name of the business
2. Title of the report
3. Date of the report

Question 30

Account titles are listed in the trial balance In the following order:

Answer 30

1. Assets
2. Liabilities
3. Equity
4. Income and
5. Expenses