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Management 1023 > Lecture 3 > Flashcards

Lecture 3 Flashcards

0
Q

What factors cause accounting information system to vary?

A

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

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1
Q

What is the accounting information system?

A

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

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2
Q

What are transactions?

A

Economic events that must be recorded in the financial statements

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3
Q

When are transactions recorded?

A

It the must be a change in value

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4
Q

What does Assets =?

A

Assets = liabilities + equity

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5
Q

What must always balance?

A

Assets = liabilities + equity

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6
Q

What does “on account” mean?

A

This means it was a transaction based on credit

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7
Q

Is a personal transaction recorded on the balance sheet?

A

No

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8
Q

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

A 
Debits = left
Credits = right
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9
Q

Normal balance for common shares?

A

Credit

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10
Q

Normal Balance for retained earnings?

A

Credit

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11
Q

Normal balance for revenues?

A

Credit

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12
Q

Normal balance for expenses?

A

Debit

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13
Q

Normal balance for dividends?

A

Debit

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14
Q

Normal balance for assets?

A

Debit

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15
Q

Normal balance for liabilities?

A

Credit

16
Q

Normal balance for shareholder’s equity?

A

Credit

17
Q

What goes up with a debit?

A

Dividends
Expenses
Assets
Losses

18
Q

What are gains and losses?

A

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

19
Q

Describe the accounting cycle

A
  1. Analyze business transaction
  2. Journalist the transactions
  3. Post to general ledger accounts
  4. Prepare a trial balance
20
Q

Steps in the recording process?

A
  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
21
Q

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

A

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

22
Q

What is double entry accounting?

A

Each transaction affects two accounts

23
Q

What is a list of accounts called?

A

A chart of accounts

24
Q

What is posting?

A

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

25
Q

What is a general ledger?

A

A complete collection of all the accounts in a company

26
Q

What is the trial balance?

A

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

27
Q

Why do you need adjusting entries?

A

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

28
Q

Types of adjusting entries? Particularly prepayments

A

Prepaid expenses

Unearned revenues

29
Q

Types of adjusting entries? Specifically accruals

A

Accrued revenues

Accrued expenses

30
Q

What are temporary accounts and why?

A

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

31
Q

What are permanent accounts?

A

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

32
Q

Describe the closing process

A
  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)
33
Q

Summarize the accounting cycle in order

A
  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

Management 1023 (2 decks)

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