Lesson 4: Overview of the Accounting Equation and Accounting Cycle

Question 1

Accounting Equation

Answer 1

Assets = Liabilities + Capital

Question 2

where Capital:

Answer 2

Beginning Capital
	\+Additional Capital
	-Drawing
	\+Revenue		Net Income/
	-Expenses		Net Loss

Question 3

ACCOUNTING CYCLE in order

Answer 3

1. Analyzing source documents
2. Journalizing business transactions
3. Posting to ledger
4. Preparation of unadjusted trial balance
5. Gathering of data for adjustments
6. Journalizing adjusting entries
7. Preparation of financial statements
8. Preparation of closing entries
9. Preparation of post-closing trial balance
10. Preparation of reversing entries

Question 4

Accounting Cycle

Short term

Answer 4

Source Documents > Journal > Ledger > Unadjusted Trial Balance > Closing Entries > Financial Statements > Adjusted Trial Balance > Adjusting Entries > Reversing Entries

Question 5

Stages of Accounting Cycle

• Covered by source documents and affecting a third party.
• Source documents are transactions that has an impact on the equation.
• Receipts
• Analyzing and journalizing
  Rules of Credit and Debit

Answer 5

Recording of External Transactions

Question 6

Stages of Accounting Cycle

• Transactions without source document
• Adjusting Entries

Answer 6

Recording of Internal Transactions

Question 7

Stages of Accounting Cycle

Answer 7

A.	Recording of External Transactions
B.	Recording of Internal Transactions
C.	Preparation of Financial Statements
D.	Recording of Closing Entries
E.	Recording of Reversing Entries