Lecture 3

Question 0

What factors cause accounting information system to vary?

Answer 0

Type of business and its transactions
Size of company
Amount of data
Information requirements

Question 1

What is the accounting information system?

Answer 1

The system of collecting and processing transaction data and communicating financial information

Question 2

What are transactions?

Answer 2

Economic events that must be recorded in the financial statements

Question 3

When are transactions recorded?

Answer 3

It the must be a change in value

Question 4

What does Assets =?

Answer 4

Assets = liabilities + equity

Question 5

What must always balance?

Answer 5

Assets = liabilities + equity

Question 6

What does “on account” mean?

Answer 6

This means it was a transaction based on credit

Question 7

Is a personal transaction recorded on the balance sheet?

Answer 7

No

Question 8

What side of the transaction sheet do debits and credits effect?

Answer 8

Debits = left
Credits = right

Question 9

Normal balance for common shares?

Answer 9

Credit

Question 10

Normal Balance for retained earnings?

Answer 10

Credit

Question 11

Normal balance for revenues?

Answer 11

Credit

Question 12

Normal balance for expenses?

Answer 12

Debit

Question 13

Normal balance for dividends?

Answer 13

Debit

Question 14

Normal balance for assets?

Answer 14

Debit

Question 15

Normal balance for liabilities?

Answer 15

Credit

Question 16

Normal balance for shareholder’s equity?

Answer 16

Credit

Question 17

What goes up with a debit?

Answer 17

Dividends
Expenses
Assets
Losses

Question 18

What are gains and losses?

Answer 18

They are like expenses and revenues but are from incidental transactions so they aren’t recorded

Question 19

Describe the accounting cycle

Answer 19

1. Analyze business transaction
2. Journalist the transactions
3. Post to general ledger accounts
4. Prepare a trial balance

Question 20

Steps in the recording process?

Answer 20

1. Analyze each transaction to determine its effect on accounts (if any) [evidence comes from source doc]
2. Record transaction as a journal entry in general journal
3. Transfer information to appropriate accounts in the general ledger

Question 21

What journal is most common and what are other journal types?

Answer 21

General journal most common
Also:
Cash receipts, cash disbursements, sales and purchases

Question 22

What is double entry accounting?

Answer 22

Each transaction affects two accounts

Question 23

What is a list of accounts called?

Answer 23

A chart of accounts

Question 24

What is posting?

Answer 24

The process of transferring from the general journal to the general ledger accounts

Question 25

What is a general ledger?

Answer 25

A complete collection of all the accounts in a company

Question 26

What is the trial balance?

Answer 26

It is used to periodically test whether the general ledger is in balance, consists of a listing of each account as of a specific date: all debit balances in one column and all credits in one column

Question 27

Why do you need adjusting entries?

Answer 27

Some items are not recorded daily Some costs are not recorded Some items unrecorded *normally prepayments and accruals

Question 28

Types of adjusting entries? Particularly prepayments

Answer 28

Prepaid expenses | Unearned revenues

Question 29

Types of adjusting entries? Specifically accruals

Answer 29

Accrued revenues | Accrued expenses

Question 30

What are temporary accounts and why?

Answer 30

Revenue expenses and dividends are temp accounts and are just subdivisions of retained earnings

Question 31

What are permanent accounts?

Answer 31

Any account on the balance sheet aka the statement of financial positions

Question 32

Describe the closing process

Answer 32

1. Close the revenue accounts (debit revenue credit income summary) 2. Close expense accounts (debit income summary and credit expense accounts) 3. Close income summary (debit income summary and credit retained earnings) 4. Close dividends account (debit retained earnings and credit dividend account)

Question 33

Summarize the accounting cycle in order

Answer 33

1. Analyze business transactions 2. Journalize the sections 3. Post to general ledger accounts 4. Prepare a trial balance 5. Journalize and post adjusting entries(prepayments and accruals) 6. Prepare an adjusted trial balance 7. Prepare financial statements: (income statement, statement of changes in equity, statement of financial position, statement of cash flows) 8. Journalize and post closing entries 9. Prepare a post-closing trial balance