Accounting Chap 4

Question 1

Flow of Data

Answer 1

A. Analyze transactions using source documents and chart of accounts.
B. Enter transactions in the general journal in proper form.
C. Post entries to the accounts in the general ledger.
D. Prepare a trial balance from the general ledger.

Question 2

A. Is a list of all accounts used by a business.

B. Arranged according to the accounting equation.

Answer 2

Chart of Accounts

Question 3

Asset accounts begin with “_.”

Answer 3

1

Question 4

Liability accounts begin with “_”

Answer 4

2

Question 5

Owner’s equity accounts begin with “_”

Answer 5

3

Question 6

Revenue accounts begin with “_”

Answer 6

4

Question 7

Expense accounts begin with “_”

Answer 7

5

Question 8

Are almost any document that provides information about a business transaction

Answer 8

Source Documents

Question 9

Trigger the analysis of what has happened and Serve as evidence to verify the accuracy of accounting records.

Answer 9

Source Documents

Question 10

provide objective, verifiable evidence of the transaction.

These documents could be important if anyone challenges the accuracy of the accounting records.

Answer 10

Source Documents

Question 11

Referred to as a book of original entry

Answer 11

General Journal

Question 12

1. It is here that the first formal accounting record of a transaction is made.
2. It shows the date of each transaction, the title of the account to be debited
   and the account to be credited, and the amounts of the debit and credit.

Answer 12

General Journal

Question 13

Named because it has only two amount columns, one for debit amounts and one for credit amounts

Answer 13

Two-column general journal

Question 14

Contents of Two-column general journal

Answer 14

a) Column 1 – Date
b) Column 2 – Description
(1) The account(s) to be debited are listed first.
(2) The account(s) to be credited are indented and listed after the debits.
c) Column 3 – Posting Reference
d) Column 4 – Debit Amount
e) Column 5 – Credit Amount

Question 15

three main questions to ask when analyzing a transaction

Answer 15

1. What happened?
2. Which accounts are affected?
    Classify these accounts as assets, liabilities, owner’s equity, revenue,
   or expenses.
3. How is the accounting equation affected?
    Determine whether the accounts have increased or decreased.
    Determine whether the accounts should be debited or credited.

Question 16

Act of entering transactions in a journal

a) Enter the date.
b) Enter the account title and amount of the debit.
c) Enter the account title and amount of the credit.
d) Enter the explanation.

Answer 16

Journalizing

Question 17

Journalizing

Answer 17

1. Skip a line between transactions.

2. The four-step process is repeated for each transaction

Question 18

A general journal entry that affects more than two accounts, thus having
more than one debit and/or one credit is called a ____

Answer 18

compound entry

Question 19

Reminder: supplies and prepaid insurance are ___ because they provide
future benefits.

Answer 19

assets

Question 20

A complete set of all of the accounts used by a business.

Answer 20

General Ledger

Question 21

1. Provides a complete record of the transactions entered into each account.
2. Accounts are numbered and arranged in the same order as the chart of accounts.

Answer 21

General Ledger

Question 22

General Ledger Account

Answer 22

1. Date column
2. Item column
3. Posting Reference column
4. Debit entry column
5. Credit entry column
6. Debit balance column
7. Credit balance column
8. Heading (account title and account number)

Question 23

Copying the debits and credits from the journal to the ledger accounts.

Answer 23

Posting to the General Ledger

Question 24

Posting to the General Ledger

In the ledger account:

Answer 24

a) Enter the date of the transaction in the Date column.
b) Enter the amount of the debit or credit in the Debit or Credit column.
c) Enter the new balance in the Balance columns under debit or credit.
d) Enter the journal page number from which each transaction is posted in the Posting Reference column.
e) The Item column is left blank except for special reasons (i.e., indicating the beginning balance, adjusting, correcting, closing, or reversing entries).

Question 25

Posting to the General Ledger

In the journal

Answer 25

Enter the ledger account number in the Posting Reference column for each transaction that is posted….is done daily or at frequent intervals

Question 26

A ____ is the link between the journal and ledger as shown by
information in the posting reference columns of the journal and the ledger.

Answer 26

cross reference

Question 27

Used to prove the equality of the debits and credits in the ledger accounts.

Answer 27

Trial Balance

Question 28

Trial Balance

Answer 28

1. All transactions should be journalized and posted before the trial balance is prepared.
2. The accounts are listed in the order used in the chart of accounts.
3. Can be prepared daily, weekly, monthly, or whenever desired
4. Individual ledger is in balance while ledger still contain errors

Question 29

Tips for Finding Errors in the Trial Balance

Answer 29

1. Double check your addition.
2. Find the difference between the debits and credits.
3. Retrace your steps through the accounting process.

Question 30

Tips for Finding Errors in the Trial Balance (Find the difference between the debits and credits.)

Answer 30

a) Check for missing debits and credits if the error is the same as the transaction.
b) Divide the difference by 2. It could mean two debits and no credits or vice versa.
c) Divide the difference by 9.
(1) It could mean a slide error.
(2) It could mean a transposition error.

Question 31

2 Ways Correcting Errors in the Trial Balance

Answer 31

1. Ruling Method

2. Correcting Entry Method

Question 32

Used to correct two types of errors:

(1) When an incorrect journal entry has been made, but not yet posted.
(2) When a proper entry has been made but posted to the wrong account or for the wrong amount.

Answer 32

Ruling Method

Question 33

Using the ruling method

Answer 33

(1) Draw a single line through the incorrect account title or amount.
(2) Write the correct information directly above the line.
(3) Initial the correction.

Question 34

Used when an incorrect entry has been journalized and posted to the wrong account.

Answer 34

Correcting Entry Method

Question 35

Using the correcting entry method:

Answer 35

(1) Make an entry in the general journal to reverse the original
entry.
(2) Include an explanation.
(3) Post to the related general ledger accounts.
(4) “Correcting” is written in the Item column of the general
ledger.

Question 36

day by day listing of the transaction of a business

Answer 36

Journal

Question 37

provide record of all transactions completed by the business

Answer 37

Purpose of Accounting

Question 38

General Journal Notes

Answer 38

Any kind of business transaction may be entered into a general journal.

Journal pages are numbered in the upper right hand corner

Debited accounts are listed first

Credited accounts are indented and listed after debits

No $ used…

Question 39

Primary advantage of General Ledger Accounts

Answer 39

it maintains running balances

Question 40

Primary advantage of T-Accounts

Answer 40

1. Easier to identify
2. Very helpful for demo & analyzing what happened

Disadvantage:
Cumbersome in computing balance of T-Account