ACCT 3122- Overview of Acct Flashcards
how does a company create value?
comp transforms resources into goods and services that it sells to customer
The acct system ensures a company is creatin
value
acct system used to:
1) measure, record, categorize, and summarize the daily operating activities of the business in monetary terms
2) provide accountability of all levels of management for their delegated responsibilities
3) protect businesses from unauthorized use or consumption
Accounting system 9 steps
1) transactions occur
2) prepare documents
3) record in journals
4) post to ledgers
5) prepare unadjusted general ledger trail balance
6) prepare and post adjusting entries
7) prepare adjusted trial balance
8) prepare financial statements
9) prepare closing entries
transactions:
exchanges of goods and services
value chain:
illustrates the enterprise’s internal business processes and the resource flows between them
2 characteristics of the value chain
duality and stockflow
duality
for each event the company gives something, we expect a related event in which the company receives something
stock flow
each event has at least one inflow and one outflow of a resource
sale event (sales and cash receipts cycle):
company gives goods/ services to the customers
cash receipt event (sales and cash receipts cycle):
company receives cash from the customer
purchase event (purchases and cash disbursements cycle):
company receives the fixed asset, raw materials, inventory etc. from supplier
cash disbursement event (purchases and cash disbursements cycle):
the company gives cash to the supplier
labor acquisition eventb (payroll cycle):
company receives labor (effort from the employees)
cash disbursement event (payroll cycle):
company gives cash to employee
cash receipt event (financing cycle):
company receives cash from lender/ stockholder
cash disbursement event (financing cycle):
company pays cash to the lender (invest plus principle) or stockholder (dividends)
what are time cards used for?
to determine gross pay owed to employees
what are customer purchase orders used for?
used to determine quantities to ship to customers and amount to bill
what are sales invoices used?
provide information for recording
internally prepared documents are prepared by:
your company
externally prepared documents are prepared by:
prepared by a person or organization doing business with your company
chart of accounts:
set of general ledger accounts defined for a particular accounting company; not simply a list of accounts but a model of the organization
blocking (as related to the chart of accounts):
blocking is the process of assigning numbers to similar accounts so that they are in a group
2 reasons why people use schema when setting up their chart of accounts
1) makes it easier to recall the account number based on the nature of the acct number rather than through memorization
2) structured classifications can facilitate the the selection of accts from management reporting
at the end of the month the bookkeeper does what to the journals
foots and cross foots the journals
for specialized journals (ex: sales journal, purchase jounral etc.) only the ______ are transferred from the journal to the general ledger
totals
for the general journal, ______________ transactions are posted to the general ledger
individual
at the end of the period, the accountant reconciles the amount in the __________ ledger to the amount in the _________ ledger
subsidiary; general
total of the trail balance must equal the ___________ ___________ balance
generak ledger
general ledger trial balance:
listing of general ledger account balances at a specific point in time (usually end of month, quarter or year)
unadjusted trail balance
before journal entries to correct errors and to record accruals and prepayments
adjusted trail balance
after journal entries to correct errors and to record accruals and prepayments
trial balance is prepared after ___________ for the period have been recorded
all transactions
adjusting entries
journal entries usually made at the end of the acct period to allocate income and expenditures to the period in which they actually occurred
adjusting entries are made in the ____________ and posted to the _________________
general journal; general ledger
adjusting entries are added to the _____________ to produce the ________________
unadjusted; adjusted
year-end adjustments are:
1: recorded in the general journal
2: posted to the general ledger
3: recorded as adjustments in the trial balance
closing entries:
set income statement accounts to zero for the start of a new reporting period
closing out entry categories
1) close out the revenue accounts (to income summary)
2) close out the expense accounts (to income summary)
3) transfer the profit or loss to retained earnings
closing entries occur
after period end and after the financial statements are prepared
closing entries are recorded in the _______________ and posted to the _________________
general journal; posted to the general ledger
