MODULE 5 Flashcards
Reviewer
Q: What is the accounting cycle?
A: The series of sequential steps or procedures performed to accomplish the accounting process.
Q: What is the first step in the accounting cycle?
A: Identification of the events to be recorded.
Q: What is the objective of identifying events to be recorded?
A: To gather information about transactions or events through source documents.
A: To gather information about transactions or events through source documents.
Q: What is the purpose of recording transactions in the journal?
A: To record the economic impact of transactions on the firm in a journal, facilitating the transfer to accounts.
Q: What is the purpose of the trial balance in the accounting cycle?
A: To verify the equality of debits and credits in the ledger
Q: What step involves journalizing and posting adjusting journal entries?
A: Preparation of a worksheet, including adjusting entries.
Q: What is the objective of closing journal entries?
A: To close temporary accounts and transfer profit to the owner’s equity.
Q: When are reversing journal entries journalized and posted?
A: At the start of the next period.
Q: What is a source document?
A: Written evidence containing information about transactions, such as sales invoices, purchase orders, or bank statements.
Q: What does analyzing a business transaction involve?
A: Identifying accounts affected, determining increases or decreases, applying the rules of debit and credit, and selecting specific account titles.
Q: What is journalizing?
A: The recording process of transactions in the journal by means of a journal entry.
Q: What are the two types of journal entries?
A: Simple journal entry and compound journal entry.
Q: What is a simple journal entry?
A: A journal entry containing a single debit and credit element.
Q: What is a compound journal entry?
A: A journal entry containing two or more debits or credits.
Q: What are the four parts of a journal entry?
A: Date, account titles, explanation, and amount.
Q: How are journal entries recorded in the journal?
A: Chronologically, arranged according to date.
Q: What is the posting reference in a journal?
A: A code assigned for each account title to facilitate transferring or posting entries to the ledger.
Q: What rule is applied if the account effect is an increase?
A: Apply the rule of debit for assets and expenses or credit for liabilities, equity, and income.
Q: What is the purpose of analyzing business transactions?
A: To ensure the reliability of information processed in the accounting cycle.
