acc test 1 Flashcards
What accounts belong to temporary accounts?
Includes revenue, expense, and profit and loss accounts
What accounts belong to permanent accounts?
Includes asset, liability, and equity accounts
What accounts normally have debit balances?
Assets, dividend, and expense
What accounts normally have credit balances?
liabilities, common stock, and revenue accounts
Do adjusted trial balances report externally or internally?
The trial balance is an internal statement for use within the company
What are the steps of accounting cycle?
Identify and analyze transactions.
Record transactions in a journal.
Post transactions to a general ledger.
Determine the unadjusted trial balance.
Analyze the worksheet.
Adjust journal entries and fix any errors.
Create financial statements.
Close the books.
What is an adjusting entry and why is it important?
Adjusting entries are necessary to update all account balances before financial statements can be prepared.
What is prepaid expense?
A prepaid expense is an expense that has been paid for in advance but not yet incurred, A decrease in prepaid expenses indicates that less cash is being spent today for expenses incurred
What is prepaid asset?
A prepaid asset is a financial resource that a business has paid for in full, although the full benefit of that resource will not be used until a future date.
What are closing entries? Why are they needed?
Closing entries are journal entries made at the end of the accounting cycle to move temporary (nominal) account balances into permanent accounts.
What accounts are zero out as a result of closing entries
Temporary Accounts:
Revenues, expenses, and dividends are temporary accounts.
closing entries what accounts are debited
Accounts that are Debited in the Closing Entries
Revenue accounts.
closing entries what accounts are credited
All expenses are closed out by crediting the expense accounts
four internal controls
- Safeguard its assets
- Enhance the reliability of its accounting records. That means that all accounts including assets, revenues, liabilities etc. should be fairly presented)
- Increase efficiency of operations
- Ensure compliance with laws and regulations.
What are the goals of internal controls
The primary purpose of internal controls is to help safeguard an organization and further its objectives
What is a limitation of internal controls in preventing fraud?
Internal controls limitations are due to human error, changes in circumstances, errors in judgment, cost constraints, collusion, and management override.
What are the elements of the fraud triangle?
The fraud triangle outlines three components that contribute to increasing the risk of fraud: (1) opportunity, (2) incentive, and (3) rationalization.
What are deposit in transit
A deposit in transit occurs when a deposit arrives at the bank too late for it to be recorded that day, or if the entity mails the deposit to the bank (in which case a mail float of several days can cause an additional delay), or the entity has not yet sent the deposit to the bank at all.
What are outstanding checks
An outstanding check is a financial instrument that has not yet been deposited or cashed by the recipient. An outstanding check is still a liability for the payor who issued the check.
What are non sufficient fund check
Non-sufficient funds, or insufficient funds, is a banking term used to indicate that the checking account does not have sufficient balance to cover a transaction or payment. Colloquially, NSF checks are also called “bounced” or “dishonored” checks.
Transactions are first entered into t-accounts
false
Financial statements are prepared from adjusted trial balance
true
When the client pays for goods just received with a gift card, the business will record revenue
true
Company issued stock and borrowed money from the bank by signing a note, as a result
DR cash
One of the goals of internal controls is to ensure that assets are reported at the highest value
false
Outstanding checks should be added to the balance per bank reconciliation
false
The elements of fraud triangle are
pressures, rationalization, and opportunities
