Lesson 1 Flashcards
What is the purpose of journal entries in accounting?
To record financial transactions in the accounting system.
True or False: Adjustments are made to final accounts to ensure that they reflect the true financial position of a business.
True
Fill in the blank: The ________ account is used to record expenses that have been incurred but not yet paid.
accrued
What is the equation for the accounting cycle?
Assets = Liabilities + Equity
Define ‘adjusting entries’.
Entries made at the end of an accounting period to update account balances before financial statements are prepared.
Multiple Choice: Which of the following accounts typically requires an adjustment at the end of the accounting period? A) Cash B) Accounts Receivable C) Prepaid Expenses D) All of the above
C) Prepaid Expenses
What is the impact of an adjusting entry on financial statements?
It ensures that revenues and expenses are recognized in the period they occur.
True or False: Journal entries must always be made in chronological order.
True
What is the difference between permanent and temporary accounts?
Permanent accounts carry their balances into the next accounting period, while temporary accounts are closed at the end of the period.
Fill in the blank: A ________ is a record of all financial transactions for a specific account.
ledger
What type of account is ‘Unearned Revenue’?
Liability account
Multiple Choice: Which of the following is NOT an adjusting entry type? A) Accruals B) Deferrals C) Reclasses D) Closures
D) Closures
What does the term ‘closing entries’ refer to?
Entries made to transfer balances from temporary accounts to permanent accounts at the end of the accounting period.
True or False: The trial balance is prepared before adjusting entries are made.
True
What is the purpose of the statement of retained earnings?
To show the changes in retained earnings over a specific period.
Fill in the blank: The ________ method matches revenues with the expenses incurred to generate them.
matching
What is an example of a non-cash adjustment?
Depreciation expense
Multiple Choice: Which financial statement shows the company’s revenues and expenses? A) Balance Sheet B) Income Statement C) Statement of Cash Flows D) Statement of Changes in Equity
B) Income Statement
True or False: Adjustments are optional and can be skipped if the accountant is pressed for time.
False
What is a ‘trial balance’?
A list of all accounts with their balances to check the accuracy of the bookkeeping.
Fill in the blank: The ________ method records revenue when it is earned, regardless of when cash is received.
accrual
What is the role of the accountant in making adjusting entries?
To ensure that all transactions are accurately reflected in the financial statements.
Multiple Choice: Which of the following is an example of an accrued expense? A) Rent Expense B) Salaries Payable C) Interest Payable D) All of the above
D) All of the above
What does ‘deferral’ mean in accounting?
Delaying the recognition of an expense or revenue to a future date.
