Module 2

Question 1

What are source documents?

Answer 1

source documents serve as proof that a transaction occurred

• invoices
• receipts
• deposit slips
• purchase orders

Question 2

What are Journals?

Answer 2

A record of chronological entry

• special journals
• general journal

Question 3

What are special journals?

Answer 3

Specific classes of transactions that occur in high frequency

• sales journal
• purchases journal

Question 4

What is a ledger?

Answer 4

A book of financial accounts

• general ledger
• subsidiary ledger

Question 5

What is a general ledger?

Answer 5

Shows period activity (debits and credits) for each account listed on the chart of accounts

Question 6

What is a subsidiary ledger?

Answer 6

Shows account activity details (debits and credit) for each account type (AR, AP, Inventory, etc.)

Question 7

How does an economic event flow through the manual accounting records?

Answer 7

When a customer places an order a sales order is created. That Sales Order results in the following simultaneous events:
1. Journal Entry posted to the Sales Journal. Which is then posted to the General Ledger.
2. Sales order posted to the AR Subsidiary Ledger. Which is periodically reconciled to the General ledger.

Question 8

How does Tracing work?

Answer 8

Source Document -> Journal -> General Ledger -> Financial Statements

Question 9

How does vouching work?

Answer 9

Financial Statements -> General Ledger -> Journal -> Source Document

Question 10

What are Master Files?

Answer 10

Contain account data, typically only one record for each account that shows the current balance, prior period balances are kept in history files

Question 11

What are Transaction Files?

Answer 11

contain transactions stored in chronological order, just like the sales journal, these files contain new transactions that have not yet been used to update master files

Question 12

What are Archive Files?

Answer 12

Contain all transactions that have been processed and used to update master files. The transactions in the transaction file are moved to this file after the master files have been updated. These files can contain all processed transactions or sometimes only current year processed transactions

Question 13

What are reference files?

Answer 13

files that contain relatively stable information used in transaction processing where a single record might be used by multiple transaction records (tax tables, customer addresses)

Question 14

What are the major steps and how are the computerized files used when vouching?

Answer 14

1. take the AR balance in the financial statement and vouch it to the AR balance in the GL Master File
2. Take the AR balance in the general ledger master file and compare it to the sum of all the individual customer AR balances in the AR subsidiary ledger master file
3. vouch the entire balance of the master file instead of specific changes to the balance
4. find source documents