Accounting Cycle

Question 1

What are the 6 steps of the accounting cycle?

Answer 1

Step 1: Collect and analyze
Step 2: Record and post transactions
Step 3: Prepare unadjusted trial balance
Step 4: Prepare adjusting entries
Step 5: Prepare adjusted trial balance
Step 6: Prepare financial statements

Question 2

Periodicity Assumption

Answer 2

A business can report its financial results within specific time periods. I.E. monthly, quarterly, or annually.

Question 3

Revenue Recognition Principle

Answer 3

A business recognizes its revenues when the goods or services are provided to the customer, regardless of when the payment is received.

Question 4

Matching Principle

Answer 4

Revenues and their associated expenses should be recognized in the same reporting period.

Question 5

What is the first step of the accounting cycle?

Answer 5

Step 1: Collect and Analyze Transactions

Transactions are recorded in a transaction journal include events such as purchase expenses and customer payments.

Question 6

What are some examples of transactions to be recorded in a transaction journal?

Answer 6

Sales transactions, cash receipts, credit purchases, cash disbursements, depreciation, interest income, interest expenses.

Question 7

What is the chart of accounts?

Answer 7

The chart of accounts lists all of the accounts and sub-accounts used to categorize transactions.

Question 8

What is the general ledger?

Answer 8

The general ledger is a record of all financial transactions in a business, organized by account. It groups transactions by account type and shows the balances for each account.

Question 9

What is the second step of the accounting cycle?

Answer 9

Step 2: Record and Post Transactions

Tracking and interpreting sales, expenses, invoices, and payments.