Lesson 4- The Accounting Cycle

Question 1

What is the accounting cycle

Answer 1

The order, sequence or process in which accounting information is recorded and processed from the time a transaction takes place to the time the information is a available to the users in financial statements

Question 2

Names the steps in the accounting cycle

Answer 2

1. Transaction
2. Source doc
3. Journal
4. Ledger
5. Trial balance
   Statement of financial performance. Statement of financial position

Question 3

Describe the accounting cycle

Answer 3

1. A transaction takes place in an entity (rental paid)
2. Recording transaction info on source doc (receipt )
3. Analysis of transactions and journals (cash receipts journals)
4. Posting to the ledgers (general ledger)
   5) balancing off ledger accounts
5. Preparation of pre-adjustment trial balance
6. Adjust accounts
7. Preparing a post adjustment trial balance
8. Nominal accounts in the trail balance closed off to the trading profit and loss account
9. Financial statements are prepared

Question 4

What is a source document

Answer 4

The original documents where transactions or events are recorded for the first time

Question 5

Why are source documents important

Answer 5

Helps us to see what type of accounts are involved in a transaction

Question 6

What should the source document contain(5)

Answer 6

1. Serial number
2. Date
3. Description of transaction/name of document
4. Amount
5. Identification of parties

Question 7

Name 4 examples of source documents

Answer 7

Credit purchases- invoice of supplier
Cash sale- cash invoice/receipt
Amount received from debtors- receipt
Sale of asset- receipt/contract/invoice
Bank deposit- deposit slip
Returns-credit note