Part 1: Notes

Question 1

What is bookkeeping?

Answer 1

The process of tracking and recording the financial transactions of a business.

Question 2

What are the responsibilities of a bookkeeper?

Answer 2

• Record financial transactions
• Reconcile bank accounts
• Manage AR and AP
• Assist tax preparers
• Generate financial statements

Question 3

What are the ethics of bookkeeping?

Answer 3

• Confidentiality
• Honesty
• Objectivity
• Professionalism

Question 4

What is the bookkeeper oath?

Answer 4

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.

Question 5

What is the accounting equation?

Answer 5

Assets = Liabilities + Equity

Question 6

What does the balance sheet help you assess?

Answer 6

Liquidity, solvency, and stability of a business.

Question 7

Why do transactions need to be correctly categorized?

Answer 7

So a business can correctly assess its revenue, expenses, assets, liabilities, and equity.

Question 8

What does the income statement help us assess?

Answer 8

The health of a business.

Question 9

What are the benefits of accounting principles?

Answer 9

• Ensure accuracy of business records
• Support informed decision making
• Build stakeholder trust
• Maintain financial transparency

Question 10

What are the steps of the Accounting Cycle?

Answer 10

1. Collect and analyze transactions.
2. Record and post transactions.
3. Prepare unadjusted trial balance.
4. Prepare adjusting entries.
5. Prepare adjusted trial balance.
6. Prepare financial statements.

Question 11

What are the advantages and disadvantages of accounting software?

Answer 11

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

Question 12

What is the difference between the general ledger and the transaction journal?

Answer 12

The ledger organizes transactions by account; the journal organizes transactions chronologically.

Question 13

Diagram the types of debits/credits in a T chart

Answer 13

__________
DEA | LER

Question 14

What are the steps of reconciliation?

Answer 14

1. Gather documents
2. Compare ledger entries with documents
3. Check for accuracy
4. Identify discrepancies
5. Make adjustments
6. Reconcile and document

Question 15

What are features of cash-basis accounting?

Answer 15

• Loved by small businesses for simplicity
• Doesn’t give full picture of income/expenses
• Bills and invoices must be tracked
• Tax advantages

Question 16

What are features of accrual accounting?

Answer 16

• Greater accuracy than cash accounting
• Necessary for businesses offering credit, prepaid expenses, and inventory

Question 17

What are the features of modified cash-basis accounting?

Answer 17

• Has AP and AR
• Not suitable for prepaid expenses

Question 18

What types of adjusting entries are made at the end of each accounting period?

Answer 18

• Unrecorded transactions
• Revenue received in advance
• Adjustments for prepayments
• Tax adjustments, such as depreciation

Question 19

What is the backbone of the income statement?

Answer 19

Net Income = Revenue - Expenses

Question 20

How are assets organized on the balance sheet?

Answer 20

From liquid to illiquid.