Accounting Information System

Question 1

What is a cash transaction

Answer 1

Payment is made at the same time or immediately during a cash sale or purchase

Question 2

What is a credit transaction

Answer 2

Payment is delayed or postponed during a credit sale or purchase

Question 3

Stage 1 of the accounting cycle: Identify and record

Answer 3

Source documents are used to record transactions in the journal and the journal entries are posted to the ledger

Transactions are recorded daily

Question 4

Stage 2 of the accounting cycle: Adjust

Answer 4

The ending balances of ledger accounts are listed in a trial balance. Any adjusting entries are recorded in the journal and posted to the ledger

Accounts are adjusted at least once in a financial year

Question 5

Stage 3 of the accounting cycle: Report

Answer 5

Based on the adjusted trial balance, the financial statements are prepared

Reports are prepared at least once in a financial year

Question 6

Stage 4 of the accounting cycle: Close

Answer 6

After the financial statements are finalised, income, expenses, income summary, drawings and dividends accounts are closed by first passing journal entries before being posted to the ledger

Accounts are closed once at the end of the financial year

Question 7

What is the use of source documents

Answer 7

Source documents provide proof that transactions have occurred