Module 4: Accounting Cycle of a Service Business

Question 1

What is Journalization?

Answer 1

• The process of recording business transactions in the accounting records (journal); applicable to double entry only

Question 2

What is a Journal?

Answer 2

• The record of all business transactions showing how they affect accounts and balances.

Question 3

What is a General Journal?

Answer 3

• A journal recording all business transactions

Question 4

What is a Special Journal?

Answer 4

• A journal that records all similar business transactions (e.g. Cash Receipt Journal, Sales Journal, etc.)

Question 5

What is a Journal Entry?

Answer 5

• Used to record a business transaction in the business’s accounting records.
• Recorded in the general ledger/subsidiary ledger to create financial statements for the business.

Question 6

What are the elements of a journal entry?

Answer 6

Elements:

1. Date - dd/mm/yy
2. Account Name - based on the chart of accounts
3. Reference No. - based on the chart of accounts
4. Debit - leftmost side
5. Credit - indented
6. Explanation - brief and concise

Question 7

What is a chart of accounts?

Answer 7

• Detailed list or directory of the accounts a business uses in its transactions.

Question 8

What are the elements of a chart of accounts?

Answer 8

Elements:

1. Account Code - numerical identifier
2. Account Name - name of account
3. Account Type - asset, liability or equity
4. Normal Balance - debit/credit
5. Description - info about the account