Chapter 01.1 - The accounting Cycle Flashcards
What’s the accounting cycle?
The recurring sequence of activities and procedures which are used to record financial information.
What are the key elements in an accounting Cycle?
- Receive source documents
- Record details from source documents in the books of prime entry.
- Post details from the books of prime entry to ledger accounts, following the rules of double entry.
- Verify the accuracy of the double entry records with a trial balance, etc.
- Prepare end of year financial statements applying accounting concepts and then start the cycle again.
What are source documents?
Supporting records that provide evidence of all the transactions to be recorded in an accounting system.
What are books of prime entry?
These books list the relevant information taken from source documents in date order and provide the information required to prepare the double entry records.
Whats a purchase invoice?
Purchase of goods on credit for resale.
Book of prime entry - Purchases Journal
Whats a sales invoice?
For sale of goods on credit.
Book of prime entry - Sales journal
What’s a debit note/ Credit note received?
Received from a supplier when goods are returned, eg; Returns outwards
Book of prime entry -Returns outwards Journal
What’s a credit note issued?
Sent to a customer when goods are returned, eg; returns inwards.
Book of prime entry - Returns inwards Journal
Whats a cheque counterfoil?
A cheque counterfoil outlines Details of payments made by cheque.
Book of prime entry - Cash Book
What’s a bank statement?
Details of bank charges, dishonoured cheques, etc.
Book of prime entry - Cash Book
What’s a petty cash voucher?
Details of small cash payments.
Book of prime entry - Petty Cash Book
What’s an invoice?
For purchase and sale of non - current assets on credit.
Book of prime entry - General Journal
What’s the accounting equation?
Assets = Capital + Liabilities
What is book keeping ?
All financial transactions need to be recorded in a systematic way, so that the owner of the business and other stake holders can be provided with the information they need to make the right decisions. This record keeping aspect of accounting is often called book keeping.
What is accounting ?
It is the process of selecting, summarising and classifying financial data in ways that provide the owners and other stakeholders of the business with useful information to help them assess performance and plan future
activities of the business.