Module 4 Study Guide Flashcards
The Accounting Cycle
The eight steps in the accounting cycle are:
1. Analyze transactions by examining source documents
2. Journalize transactions in the general journal
3. Post entries to the respective accounts in the general ledger
4. Prepare a trial balance of the unadjusted accounts and begin the trial balance
worksheet
5. Journalize and post adjusting journal entries, prepare adjusted trial balance, and
complete worksheet
6. Prepare the financial statements
7. Journalize and post closing entries
8. Prepare the post-closing trial balance
What are Special Journals and Subsidiary Ledgers and why are they used?
Special journals group together similar transactions. Subsidiary ledgers are within an accounting system and contain accounts receivable and accounts payable showing how much each customer owes (accounts receivable) and how much is owed to each supplier (accounts payable)
Define an Accounting Information System
Accounting Information Systems organize financial data
Differentiate between a classified and unclassified Balance Sheet
classified balance sheet: contains the same 3 major categories & subdivides them to provide useful information for interpretation & analysis by users of financial statements
unclassified balance sheet: includes 3 major categories- assets, liabilities, & stockholders equity
DBD Company paid Company A $15,000 for their outstanding receivable that had been outstanding for 40 days. Company A’s credit terms with DBD were Net 30 days.
To account for this $15,000 transaction, how should Company A record this event in the general journal?
Debit cash for $15,000 and credit accounts receivable for $15,000.
Which step in the accounting cycle comes after journalizing transactions in the general journal?
Posting entries to the general ledger
Of the eight steps or processes of the accounting cycle that an accountant follows in each closing, which procedure is last?
Prepare the post-closing trial balance.
How do computerized accounting systems benefit accounting firms?
By organizing financial accounting data
What purpose do special journals serve in accounting?
They group together similar transactions, like sales and purchases.
accounting cycle
a series of steps performed during the accounting period (some throughout the period and some at the end) to analyze, record, classify, summarize, and report useful financial information for the purpose of preparing financial statements.
business transaction
are measurable events that affect the financial condition of a business.
journalizing
the process of entering the effects of a transaction in a journal.
posting
the process of transferring the information in the general journal to the ledger accounts.
accrual basis of accounting
recognize revenues when the company makes a sale or performs a service, regardless of when the company receives the cash.
matching concept
the matching of expenses to revenues in the period that revenues are recorded.
worksheet
a columnar sheet of paper or a computer spreadsheet on which accountants summarize information needed to make the adjusting and closing entries and to prepare the financial statements.
simple journal entries
involved one debit and one credit.
special journals
group together similar transactions.
accounting information systems
organize financial data
operating cycle
(or cash cycle) is the time it takes to begin with cash, buy necessary items to produce revenues (such as materials, supplies, labor, and/or finished goods), sell goods or services, and receive cash by collecting the resulting receivables.
classified balance sheet
contains the same three major categories and subdivides them to provide useful information for interpretation and analysis by users of financial statements.
The eight steps in the accounting cycle are:
Analyze transactions by examining source documents
Journalize transactions in the general journal
Post entries to the respective accounts in the general ledger
Prepare a trial balance of the unadjusted accounts and begin the trial balance worksheet
Journalize and post adjusting journal entries, prepare adjusted trial balance, and complete worksheet
Prepare the financial statements
Journalize and post closing entries
Prepare the post-closing trial balance
How are assets listed on the balance sheet?
Most liquid to least liquid
Which statement about the worksheet is not correct?
The worksheet is prepared during step five of the accounting cycle.
The worksheet can be used instead of the general journal.
The worksheet is prepared each time financial statements are needed.
The worksheet is not part of the formal accounting records.
The worksheet can be used instead of the general journal.
Which asset is considered current on the asset side of the typical balance sheet?
Prepaid expenses
Leasehold improvements
Land
Intangible assets
Prepaid expenses
Accumulated depreciation and accumulated amortization are contra accounts to which type of accounts on basic financial statements?
Asset accounts
Which account is a temporary, or nominal, account closed directly to the retained earnings account at the end of the accounting period?
Dividends
Revenue
Equipment
Income summary
Dividends
