Chp 2: Accounting Information System

Question 1

Explain the difference between cash and credit transaction

Answer 1

Cash transaction is when business pays or receives payment immediately at the point of event.

Credit transaction is when business pays or receives payment at a later date from the event.

Question 2

Explain the accounting information system process

Answer 2

Source document -> Journal-> Ledger -> Trial Balance -> Financial Statements

Question 3

Explain objectivity Theory

Answer 3

Accounting information recorded

must be supported by reliable and verifiable evidence

so that financial statements will be free from opinions and biases.

Question 4

Explain historical cost Theory

Answer 4

Transactions should be recorded at their

original cost

Question 5

Explain MONETARY Theory

Answer 5

Only business transactions that can be measured in monetary terms are recorded.

Question 6

Business bought inventory ON CREDIT.

What source document?

Answer 6

INVOICE

Question 7

What document would business receive when it returned faculty goods to credit supplier?

Answer 7

CREDIT NOTE

Question 8

What document would business (we) give to credit customer when he returns good to business (us)?

Answer 8

Credit Note

Question 9

What document is used when business sold goods

on credit to KK?

Answer 9

Invoice

Question 10

What source document would be used to increase the amount owed by the credit customer?

Answer 10

Debit Note

Question 11

Name the source document.

Business purchased goods with cash

Answer 11

Receipt