CHAPTER 2 Flashcards
What is the accounting cycle?
The accounting cycle is a series of steps that companies follow to record and process financial transactions and prepare financial statements.
What is the first step in the accounting cycle?
The first step is identifying and analyzing transactions.
What is a journal in accounting?
A journal is a chronological record of all financial transactions of a business.
What is a ledger?
A ledger is a collection of accounts that summarizes all transactions related to each account.
What is a trial balance?
trial balance is a report that lists all the balances of the accounts in the ledger to verify that total debits equal total credits.
What are adjusting entries?
Adjusting entries are journal entries made at the end of an accounting period to update account balances before financial statements are prepared.
What is the purpose of closing entries?
Closing entries are made to transfer temporary account balances to permanent accounts and reset temporary accounts for the next accounting period.
What is the role of financial statements in the accounting cycle?
Financial statements summarize the results of the accounting cycle, providing essential information for stakeholders.
What is the role of financial statements in the accounting cycle?
Financial statements summarize the results of the accounting cycle, providing essential information for stakeholders.
What is the difference between permanent and temporary accounts?
Permanent accounts (real accounts) carry their balances into the next accounting period, while temporary accounts (nominal accounts) are closed at the end of the period.
What is the significance of the accounting cycle for businesses?
The accounting cycle ensures accurate financial reporting, enabling businesses to make informed financial decisions and comply with regulations.
