MODULE 8 Flashcards
____ is the process of recording business transactions in a systematic and chronological manner
Bookkeeping
Bookkeeping is ___ because it follows procedures and principles. On the other hand, it is ___ because the transactions are recorded in order of the date of occurrence.
Systematic, Chronological
IT IS THE STARTING POINT OF THE ACCOUNTING PROCESS and is the foundation for gathering the information necessary to answer questions related to the profitability, solvency, and liquidity of the business
Bookkeeping
Each business has a ___ who is IN CHARGE TO RECORD, MAINTAIN, AND UPDATE BUSINESS RECORDS from all sorts of financial transactions using account title that can be found in the charts of accounts already set up by the Accountant.
Bookkeeper
The ___ DICTATES THE BOOKKEEPER to keep track of all financial transactions of the business.
Bookkeeping function
Only transactions that has ___ will be recorded.
Monetary value
The bookkeeper uses this to RECORD THE BUSINESS TRANSACTIONS WHICH IS TO BE CONSOLIDATED later to help construct financial statement such as the Trial Balance, Income Statement and Balance Sheet.
Book of Accounts
The book of accounts are composed of the ___
Journal and Ledger
It refers to the book of ORIGINAL ENTRY
Journal
It refers to the book of FINAL ENTRY
Ledger
It is the most BASIC JOURNAL which provides columns for date, account titles and explanations, folio or references and a separate column for debit and credit entries
General Journal
A general journal provides columns for:
- Date
- Account titles and explanations
- Folio or references
- Debit and Credit Card Entries
The ___ is a GROUPING OF ALL ACCOUNTS DIRECTLY TRACEABLE TO THE CHART OF ACCOUNTS. These accounts will be reflected in the financial statements as a summary of all financial activities that have taken place as recorded in the general journal and subsidiary ledgers
General Ledger
The ___ is a group of accounts DIRECTLY ASSOCIATED FROM THE GENERAL LEDGER. This record is created TO MAINTAIN INDIVIDUAL ACCOUNTS FOR CUSTOMERS AND VENDORS WHOSE CASH IS NOT BEING USED AS A MEDIUM OF EXCHANGE when purchasing or selling merchandise
Subsidiary ledger
What is included in a subsidiary ledger?
Accounts Receivable and Accounts Payable
In the process of journalization, following the rules of ___ are an essential part to ensure accurate recording and sound decision-making
Debit and Credit
Debit is abbreviated as __ while __ for Credit.
DR, CR
When cash or non-cash items are RECEIVED, the said cash or non-cash items must be recorded in the ___ column. This means that the debit balance increased. It is called ___.
Debit, Value Received
When cash or non-cash items are GIVEN, the said cash or non-cash items must be recorded in the ___ column. This means that the credit balance is increased. It is called ___
Credit, Value parted with
The following steps will be undertaken in determining account balances for every account title such as cash, account receivable, etc.:
- Add all the debit side to generate total debit
- Add all the credit side to generate total credit.
- Subtract total debit to the total credit.
- Determine the balance of each account.
It is a LIST OF ALL LEDGER ACCOUNTS WITH CLOSED OR FINAL BALANCES ON A CERTAIN PERIOD arranged according to the rules of debit and credit.
Trial balance
In the trial balance, the debit and credit columns must be ___ in total amount. This is the first report prior to financial statement preparation
Equal
What are the five major accounts?
- Assets
- Liabilities
- Owner’s Equity
- Revenue
- Expense Accounts
The trial balance report has two phases. What are they?
- Unjusted trial balance
- Adjusted trial balance
On the first phase of the trial balance, the first phase___ is a REPORT OF ALL BALANCES AFTTER POSTING OF THE GENERAL LEDGER ACCOUNTS.
Unadjusted trial balance
the second phase is the ___. This phase is a
FINAL REPORT OF THE TRIAL BALANCE AFTER ALL NECESSARY ADJUSTMENTS IN JOURNAL ENTRIES ARE POSTED IN THE GENERAL LEDGER.
Adjusted trial balance
Making an ___ helps the bookkeeper
CAPTURE ALL FINANCIAL EVENTS THAT HAPPENED OVER A PERIOD OF TIME WITHIN THE ACCOUNTING CYCLE. It is essential in keeping the financial record updated.
Adjusting entry
This is a METHOD OF ALLOCATING THE COST OF AN ASSET TO AN EXPENSE OVER THE ACCOUNTING PERIODS THAT MAKE UP THE ASSET’S USEFUL LIFE.
Depreciation
The five basic sources of adjusting entries:
- Depreciation expense
- Deferred expenses of prepaid expenses
- Deferred income of unearned income
- Accrued expenses of accrued liabilities
- Accrued income or accrued assets
Examples of assets subject to depreciation are:
- Store
- Office
- Building
- Transportation equipment
___ can also be referred to as the DECREASE IN THE USEFULNESS of these types of assets
Depreciation
The ___ is an allocated for all sixed assets except land.
Depreciation expense
These are items that have been INITIALLY RECORDED AS LIABILITIES BUT ARE EXPECTED TO BECOME INCOME OVER TIME
or through the operations of the business.
Deferred income of unearned income
These are items of expenses that HAVE BEEN INCURRED BUT HAVE NOT BEEN RECORDED AND PAID. These are receivables of the business
Accrued expenses of accrued liabilities
These are items that have been INITIALLY RECORDED AS ASSETS BUT ARE EXPECTED TO BECOME EXPENSES OVER TIME or through the operations of the business
Deferred expenses or prepaid expenses
If the result of operation is positive, then the business earns ___ otherwise, ___.
Net income, Net loss
This statement is ONE OF THE MAJOR FINANCIAL REPORTS. Also known as profit and loss statement or statement of comprehensive income. This statement summarizes the results of company’s operations for a specific period of time.
Income statement
Ledger accounts that can be found in the income statement are called ___. They are called such because at the end of the accounting period, balances under these accounts are transferred to the capital account, thus having only temporary amounts and resulting to zero beginning balances at the beginning of the following year.
Temporary accounts of Nominal account
The different parts of income statement are:
- The heading or title of report
- Name of the company
- Date or period
- Income or revenues
- Expenses
- Net income/Net loss
It consists of ALL INCOME RECEIVED WITHIN THE PERIOD UPON PROVISION OF SERVICES for service-concern business and sales for merchandising
Income or revenues
MONEY SPENT during the conduct of business operations
Expenses
The OUTCOME of business operations
Net income/Net loss
Also known as the STATEMENT OF FINANCIAL POSITION. This statement SUMMARIZES THE TOTAL BALANCES of assets, liabilities and owner’s equity
Balance sheet
The balance sheet is composed of ___. Permanent in nature because their balances remain intact and will be forwarded from one period to another.
Permanent accounts
Asset account PRESENTED UNDER THE ASSET PORTION OF THE BALANCE SHEET
such as Allowance for Bad debts and Accumulated depreciation.
Contra asset
The different parts of balance sheet are:
- The heading or title of report
- Name of the company
- Date or period covered
Assets that CAN BE REALIZED (collected, sold, used up) one year after year-end date
Current assets
Liabilities that FALL DUE (paid, recognized as revenue) within one year after year-end date
Current liabilities
Assets that CANNOT BE REALIZED (collected, sold, used up) one year after yearend date
Non-current assets
Liabilities that DO NOT FALL DUE (paid, recognized as revenue) within one year after year-end date
Non-current liabilities
Capital is an item of balance sheet wherein the capital or interest of the owner of the business is listed
Owner’s Equity or Capital
It has always been the OVERALL GOAL OF THE BUSINESS. It is of great achievement in the successful implementation of strategic, operating, and other plans
Profitability
It will reveal the outcome of the business operations.
Financial statements
A ___ is like a medical doctor who will conduct diagnosis by reading the financial report and render interpretations on it which will be used as the basis of a sound economic decision making.
Financial analyst
It includes all of a FIRM’S INFLOW OF A CASH in a given financial period
Cash Receipt
Two types of sale transactions
- Cash sales
- Credit sales
The amount received in ___ transactions will be recorded in the cash receipt record book bearing the account cash. This will increase cash inflow.
Cash sales
The credit sales transactions cannot be recorded in the cash receipt record book because there were no inflows of cash. Instead, it will be recorded in the account receivable account
Credit sales
It is a record of all sales transactions
Sales report
It RECORDS ALL CASH INFLOW OR OUT FLOW OF THE BUSINESS. Normally, it will report three business activities, namely, the operating, investing and financing activities
Cash Flow Report
The operating activities involves the main operations of the business which the buying supplies (___) and selling (___) of its products.
Cash outflow, cash inflow
The investing activities involves the acquisition of long term or fixed assets of the business (___) and selling the old one’s cash inflow.
Cash outflow
The financing activities involves the acquisition of capital of the business thru borrowings or investors (___) and payments of investors and creditors (___).
Cash inflow, Cash outflow
