Accounting as A System

Question 1

What are the stages of the accounting cycle?

Answer 1

1. Identify and analyze transactions
2. Journalize
3. Posting to the Ledger
4. Trial Balance Period
5. Making Adjusting Entries

The accounting cycle is a series of steps that accountants use to ensure the accuracy and completeness of financial statements.

Question 2

What is the first stage of the accounting cycle?

Answer 2

Identify and analyze transactions

Question 3

What is the second stage of the accounting cycle?

Answer 3

Journalize

Question 4

What is the third stage of the accounting cycle?

Answer 4

Posting to the Ledger

Question 5

What is the fourth stage of the accounting cycle?

Answer 5

Trial Balance Period

Question 6

What is the fifth stage of the accounting cycle?

Answer 6

Making Adjusting Entries

Question 7

What is a business?

Answer 7

Organizations that provide goods and/or services to make a profit

Question 8

List four activities that businesses engage in.

Answer 8

• Providing raw materials through mining, farming, fishing, etc.
• Manufacturing goods, turning raw materials into finished products
• Selling goods to the general public (retailers) or to other businesses (wholesalers)
• Providing services for other businesses and the general public

Question 9

What defines a sole trader business?

Answer 9

One individual owns and controls the business

Question 10

What happens to profits in a sole trader business?

Answer 10

All profits belong to the individual owner

Question 11

What are the risks for a sole trader if the business is unsuccessful?

Answer 11

The individual can lose whatever has been invested and private possessions

Question 12

What is a partnership in business terms?

Answer 12

A business owned by two or more individuals

Question 13

How do partners in a partnership share profits?

Answer 13

Profits are shared between them

Question 14

What is a key responsibility of partners in a partnership?

Answer 14

They are jointly responsible for the debts of the business

Question 15

Fill in the blank: In a partnership, partners can lose their private possessions if the business is _______.

Answer 15

[unsuccessful]

Question 16

What type of company is owned by shareholders who contribute to the funds needed to establish and run it?

Answer 16

Limited liability companies

Question 17

Who manages the day-to-day operations of a limited liability company?

Answer 17

Directors elected by shareholders

Question 18

What is the primary financial risk for shareholders in a limited liability company?

Answer 18

Limited to the amount they invest .

Question 19

What are co-operatives primarily run to provide?

Answer 19

Goods and services to their members

Question 20

How do successful co-operatives typically reward their members?

Answer 20

Share of surplus or reinvestment in the organization

Question 21

True or False: Shareholders in a limited liability company risk losing their private funds if the company incurs debts.

Answer 21

False

Question 22

Fill in the blank: Co-operatives are controlled by _______.

Answer 22

Members

Question 23

What are non-profit organizations?

Answer 23

Organizations formed by members for particular activities, possibly social or sporting.

Question 24

Do non-profit organizations aim to make a profit?

Answer 24

No, they do not aim to make a profit.

Question 25

What must non-profit organizations be in order to survive?

Answer 25

Financially viable.

Question 26

What are the main financial statements inspected by owners, managers, and stakeholders?

Answer 26

The income statement, balance sheet, and cash flow statement.

Question 27

What is the chief source of information about profits or losses for sole traders, partnerships, and limited companies?

Answer 27

The income statement.

Question 28

What components make up the income statement?

Answer 28

Trading account and statement of profit and loss.

Question 29

Fill in the blank: The income statement includes a _______ and a statement of profit and loss.

Answer 29

trading account.

Question 30

What terms are used instead of profit and loss in co-operatives and non-profit organizations?

Answer 30

Surpluses and deficits

Question 31

What financial statement provides details of resources owned by a business?

Answer 31

Statement of financial position (balance sheet)

Question 32

What additional financial statement must limited companies produce?

Answer 32

Cash flow statements

Question 33

What does the statement of financial position reveal about resource use?

Answer 33

How successful the owners and managers have been in using resources well

This is assessed in conjunction with information about profits.

Question 34

Fill in the blank: The statement of financial position is also known as a _______.

Answer 34

Balance sheet

This term is commonly used in accounting.

Question 35

True or False: Cash flow statements are included in the basic financial statements for all organizations.

Answer 35

False

Only limited companies are required to produce cash flow statements.