Chpt 2

Question 1

Diff between cash and credit transactions

Answer 1

In a cash transaction, payment is made immediately when goods are sold or services are provided. While in a credit transaction, payment for goods or services is delayed to an agreed-upon future date.

Question 2

Accounting cycle

Answer 2

Stage 1: Identifying and Recording
Stage 2: Adjusting
Stage 3: Reporting
Stage 4: Closing

Question 3

Order of accounting info

Answer 3

1: Source Documents
2: Journals
3: Ledgers
4: Trial Balance
5: Financial Statement

Question 4

Define source document

Answer 4

A source document is a written document that provides details of a business transaction to be recorded in a journal. It serves as an objective and verifiable evidence that a transaction has taken place.

Question 5

What is AIS

Answer 5

Accounting Information System (AIS) is a system that a business uses to collect, store and process accounting data.

Question 6

Suitable theory for source documents

Answer 6

Source documents are important as they provide evidence that transactions have taken place.
This is consistent with the objectivity theory which states that accounting information recorded by business must be supported by reliable and verifiable evidence so that financial statement will be free from opinions and biases.