Lesson 7: Stages of Accounting Cycle

Question 1

What are the transactions indicated in the source document?

Answer 1

Investment
Cash Sales
Account Sales
Purchase of Supplies
Purchase of Merchandise
Received bills
Paid bills
Paid rent
Paid expenses
Acquire loans

Question 2

These are events or occurrences which bring changes in assets, liabilities, and owner’s equity of the business, these are business events having a monetary impact on the financial statements of a business. They are recorded in the accounting books of the business.

Answer 2

Accounting Transactions

Question 3

Examples of Accounting Transactions

Answer 3

• Sales in cash to a customer
• Sales on credit to a customer
• Receive cash in payment of an invoice owed by a customer
• Purchase fixed assets from a supplier
• Record the depreciation of a fixed asset over time
• Purchase consumable supplies from a supplier
• Investment in another business
• Investment in marketable securities
• Engaging in a hedge to mitigate the effects of an unfavorable price change
• Borrow funds from a lender
• Issue a dividend to investors
• Sale of assets to a third party

Question 4

These are those transactions with monetary impact but which no outside person or organization is involved, it does not relate with two parties nor does it involve any other second party.

Answer 4

Internal Transactions

Question 5

Examples of Internal Transactions

Answer 5

• Use of supplies
• Expired prepayments
• Depreciation expenses
• Bad debts on accounts receivable
• Setting up of petty cash fund
• Accrual of expenses and income

Question 6

The transactions that occur between two persons or two organizations or between a person and organization in terms of money

Answer 6

External Transactions or Business Transactions.

Question 7

Are names or titles used to sort, record and store transactions.

Answer 7

Account Titles

Question 8

ACCOUNT TITLES

Color Coding:
Black -
Red -
Blue -

Answer 8

ACCOUNT TITLES

Color Coding:
Black – Service; Merchandising; Manufacturing
Red – Merchandising
Blue - Manufacturing