Part 1: Notes Flashcards
What is bookkeeping?
The process of tracking and recording the financial transactions of a business.
What are the responsibilities of a bookkeeper?
- Record financial transactions
- Reconcile bank accounts
- Manage AR and AP
- Assist tax preparers
- Generate financial statements
What are the ethics of bookkeeping?
- Confidentiality
- Honesty
- Objectivity
- Professionalism
What is the bookkeeper oath?
I will uphold the bookkeeper oath by choosing to act with confidentiality, honesty, objectivity, and professionalism in all interactions with my clients to the best of my ability and judgment.
What is the accounting equation?
Assets = Liabilities + Equity
What does the balance sheet help you assess?
Liquidity, solvency, and stability of a business.
Why do transactions need to be correctly categorized?
So a business can correctly assess its revenue, expenses, assets, liabilities, and equity.
What does the income statement help us assess?
The health of a business.
What are the benefits of accounting principles?
- Ensure accuracy of business records
- Support informed decision making
- Build stakeholder trust
- Maintain financial transparency
What are the steps of the Accounting Cycle?
- Collect and analyze transactions.
- Record and post transactions.
- Prepare unadjusted trial balance.
- Prepare adjusting entries.
- Prepare adjusted trial balance.
- Prepare financial statements.
What are the advantages and disadvantages of accounting software?
Advantages:
- Basic calculations are done for you
- Automatic credits and debits are assigned
- Accounts are simultaneously updated
Disadvantages:
- Data entry accuracy
- No ability to reason
What is the difference between the general ledger and the transaction journal?
The ledger organizes transactions by account; the journal organizes transactions chronologically.
Diagram the types of debits/credits in a T chart
__________
DEA | LER
What are the steps of reconciliation?
- Gather documents
- Compare ledger entries with documents
- Check for accuracy
- Identify discrepancies
- Make adjustments
- Reconcile and document
What are features of cash-basis accounting?
- Loved by small businesses for simplicity
- Doesn’t give full picture of income/expenses
- Bills and invoices must be tracked
- Tax advantages
What are features of accrual accounting?
- Greater accuracy than cash accounting
- Necessary for businesses offering credit, prepaid expenses, and inventory
What are the features of modified cash-basis accounting?
- Has AP and AR
- Not suitable for prepaid expenses
What types of adjusting entries are made at the end of each accounting period?
- Unrecorded transactions
- Revenue received in advance
- Adjustments for prepayments
- Tax adjustments, such as depreciation
What is the backbone of the income statement?
Net Income = Revenue - Expenses
How are assets organized on the balance sheet?
From liquid to illiquid.
