Chapter 3

Question 1

What are the 7 accounting cycle?

Answer 1

1. Data gathering
2. Journalize
3. Recording in books of accounts
4. Posting
5. Preparation of adjusting entries
   Preparation of adjusted trial balance
6. Preparation of financial statements
7. Preparation of closing entries
   Preparation of post-closing balance
   Preparation of reversal entries

Question 2

Journalize in either?

Answer 2

a. journal voucher
b. cash receipt voucher
c. cash payment voucher

Question 3

Observed accounting principle in data gathering from acctg cycle

Answer 3

entity
objectivity
cost
materiality
matching
accounting period
revenue recognition
conservatism

Question 4

Book of original entry

Answer 4

1. General journal
2. Cash receipt journal
3. Cash payment journal
4. Other special books

Question 5

Control in 3rd step of Acctg cycle

Answer 5

a. recording must be systematic and chronological
b. must be done by a person not handling cash
c. books must be registered with BIR
d. books must have monthly totals

Question 6

From the journal, the monthly totals will be transferred monthly to the ledger, which is the book of final entry.

Answer 6

Posting

Question 7

First phase of summarization. Transfer the figures in the general ledger to the working paper’s first two columns.

Answer 7

Trial balance

Question 8

This is very important because this transaction will identify the transactions as business transactions.

Answer 8

Data gathering

Question 9

If we are to apply in real terms only business transactions are allowed to be entered into the books of the accounts and such transactions should be authorized by the manager of the company.

Answer 9

Entity concept

Question 10

States that transactions must be supported by pieces of evidence.

Answer 10

Objectivity principle

Question 11

The BIR’s standards are:

Answer 11

 The receipt must be in the name of the company.

 The receipt must be an invoice (cash invoice or credit invoice) or an official receipt.

 The receipt must be claimed within the taxable period only.

Question 12

Because we can check on the authorization for the incurrence of the said transactions, with their supporting evidence, they are verifiable.

Answer 12

Verifiability principle

Question 13

These transactions incurred with the proper supporting pieces of evidence, as authorized by the manager will now be forwarded to the accounting department for journal entry preparation.

Answer 13

Reliability principle

Question 14

Represents receipt of cash in hand

Answer 14

Cash receipt voucher

Question 15

shows the responsibility of the person who prepared the voucher;

Answer 15

Prepared by

Question 16

shows the accuracy of the transaction and the journal entry prepared;

Answer 16

Checked by

Question 17

shows that the journal entry is now approved for entry in the company’s books of account

Answer 17

Approved by

Question 18

Components of the cash receipt voucher, cash payment voucher, journal voucer

Answer 18

1. The heading, which consists the:
   * Name of the company, and
   * Name of the office form.
2. The cash payment voucher no.is essential for future referencing. Should there be a problem with the entry, the no. can be used as a reference;
3. The body of the form particulars, debit, and credit;
4. Prepared by shows the responsibility of the person who prepared the voucher;
5. Checked by shows the accuracy of the transaction and the journal entry prepared;
6. Approved by shows that the journal entry is now approved for entry company’s books of account;
7. The name of the bank check number and the amount are essential for recording purpose and for bank reconciliation purpose later;
8. The received by portion is essential so we will know who received the payment in case there is a problem. We can refer to the name that collected the check payment and
9. The check itself. The check should be crossed to indicate that the check payment could only be deposited to the account of the payee. The check cannot be encashed.

Question 19

portion is essential so we will know who received the payment in case there is a problem. We can refer to the name that collected the check payment and

Answer 19

Received by

Question 20

should be crossed to indicate that the check payment could only be deposited to the account of the payee.

Answer 20

Check

Question 21

Cannot be encashed.

Answer 21

Check

Question 22

a written authorization prepared for every financial transaction, or for every transaction that meets defined requirements.

Answer 22

Journal voucher

Question 23

Contains all the cash received by the business entity and journalized in cash receipt voucher.

Answer 23

Cash receipt book

Question 24

serves as a control measure of accounting officers so that no transactions will be recorded by the accounting staff

Answer 24

cash receipt voucher

Question 25

The process of transferring the information contained in the journals to the ledger (book of final entry).

Answer 25

Posting

Question 26

It is very important supposing the auditor validates where the figures come from he may refer to it for verification.

Answer 26

P/R or Posting Reference column

Question 27

The list of account titles in the ledger with their corresponding balance does not demonstrate whether the accounts are correct or not, but whether all accounts transferred correctly to the ledger.

Answer 27

Trial balance

Question 28

Trial balance is of two types. These are:

Answer 28

1. Trial balance of total
2. Trial balance of balances

Question 29

listing the account title found in the ledger and getting the total of each debit and credit to be written in the debit and credit column of the trial balance.

Answer 29

Trial balance of total

Question 30

What should be observed when using a trial balance of total:

Answer 30

a. The report should start with the proper heading so the user can know what the report is all about. The heading contains the following information:

Main Heading
 Name of the company
 Name of the statement (trial balance)
 Date

Column Heading
 Account title
 Debit column
 Credit column

b. The currency sign (peso sign) is only written on the following:
* First figure of the column
* Total

c. The account title is arranged in accordance with its appearance in the ledger.

d. Since we are preparing a trial balance of total, account with no figures in the ledger should be marked zero.

e. Once balanced, you have to double rule. Double ruling signifies the completeness of your report.

Question 31

Under this type, get the difference between the debit and the credit, and place the difference under the column (debit or credit) having the greater value.

Answer 31

Trial balance of balances