Accounting Chapter 2

Question 1

Step 1 in accounting cycle

Answer 1

1. Journalize all transactions
   Financial events that occur within a business in chronological order which show where balances increase and decrease

Question 2

Step 2 in accounting cycle

Answer 2

2. Post all transactions to the ledger Post debits and credits from the journal to the proper ledger account, thus creating a record classified by accounts

Question 3

Step 3 in accounting cycle

Answer 3

3. Prepare a trial balance
   Prove the equality of the debits and credits from the ledger accounts

Question 4

Step 4 in accounting cycle

Answer 4

4. Complete end of period adjusting entries
   Make adjusting entries in the general journal and post to the ledger account

Question 5

Step 5 in accounting cycle

Answer 5

5. Prepare an adjusted trial balance
   Prove again the adjusted debits and credits in the ledger are in balance. These are the amounts to prepare the financial statement

Question 6

Step 6 in accounting cycle

Answer 6

6. Prepare financial statements
   An income statement shows the results of operation for the period. A statement of retained earnings shows changes in retained earnings during the period. A balance sheet shows the financial position of the business at the end of the period. Financial statements should be accompanied by notes disclosing facts necessary for the proper interpretation of those statements.

Question 7

Step 7 in accounting cycle

Answer 7

7. Journalize and post closing entries
   Zero out the revenue, expense, and dividend accounts making them ready for recording the events of the next accounting period. These entries also bring the balance in the Retained Earnings account up-to-date

Question 8

Step 8 in accounting cycle

Answer 8

8. Prepare after closing trial balance
   This steps ensure that the ledger is in balance after the posting of all closing entries

Question 9

Why we must enter adjustments

Answer 9

To make certain that appropriate amounts of revenue and expenses are reported in the company’s income statement

Question 10

What happens to profit if a particular adjusting entry is not posted

Answer 10

It can lead to inaccurate financial statements

Question 11

Depreciation purposes

Question 12

Depreciation Accounting Entries

Question 13

Book value

Answer 13

Assets are acquired at their accumulated value

Question 14

Market value