SUA Chapter 1

Question 1

footnotes?

Answer 1

a CPA firm cannot indicate that the statements are fairly stated unless footnotes are included

Question 2

transactions

Answer 2

the exchanges between a company and another party

Question 3

Recording Transactions Take 5 Steps

Answer 3

1. Identify the exchanges or adjustments that must be recorded
2. Determine which account balances are affected by the exchanges or adjustments
3. Assign proper values to the transactions for each account
4. Record the transactions in the proper time period
5. Record the transactions in the accounting records, and summarize them into the financial statements.

Question 4

Steps in the accounting process

Answer 4

1. Transactions occur
2. Prepare Documents
   3 Record in Journals
3. Post to ledgers
4. Prepare Unadjusted General Ledger Trial Balance
5. Prepare and Post adjusting Entries
6. Prepare adjusted Trial Balance
   8 Prepare Financial Statements
7. Prepare Closing Entries

Question 5

Types of Journals

Answer 5

Sales Journal
Cash Receipts journal
Purchase journal
Cash disbursements journal
Payroll journal 
General journal

Question 6

Sale Journal

Answer 6

Sale or other revenue, sale returns and allowances may be recorded here or in a separate journal

Question 7

Cash receipts journal

Answer 7

all cash receipts

Question 8

Purchases journal

Answer 8

all purchases of goods and services except payroll, purchase returns and allowances may be recorded here or in a separate journal

Question 9

cash disbursements journal

Answer 9

all cash disbursements made by check except payroll

Question 10

payroll journal

Answer 10

all payroll disbursements(usually made by check)

Question 11

General Journal

Answer 11

error corrections, adjusting entries, closing entries, and other transactions not recorded in other journals

Question 12

chart of accounts

Answer 12

account titles for a company are included in this

Question 13

general ledger

Answer 13

summarized the transactions in journals

Question 14

subsidiary ledgers

Answer 14

ledgers that have all of the transactions in them

Question 15

adjusting entries

Answer 15

used to adjust totals from cash to accrual basis
only recorded at the end of the period
recorded in the general journal
most adjusting entries are not posted to sub ledgers

Question 16

Six General Categories of Adjusting Entries

Answer 16

Prepaid expense 
Accrued Expense
Accrued Revenue
Unearned Revenue
Estimated Items
Inventory adjustment

Question 17

Closing Entries

Answer 17

1. Close all revenue accounts to income summary
2. Close all expense accounts to income summary
3. Close the income summary to stockholders’ equity

Question 18

post closing trial balance

Answer 18

the statement that remains after all of the temporary accounts have been closed
source of each amount is a general ledger

Question 19

internal controls

Answer 19

methods used by a company to safeguard its assets

1. adequate documents and records
2. authorization of transactions
3. Separation of the custody of assets from accounting
4. Independent checks on performance

Question 20

adequate documents and records

Answer 20

documents should be:

1. Prenumbered consecutively
2. Prepared before the transaction occurs, at the time it occurs, or as soon as possible
3. Sufficiently simple to make sure they are understood
4. Designed for multiple uses whenever possible
5. Constructed in a manner that aids correct preparation

Question 21

authorization of transactions

Answer 21

every transaction must be authorized

Question 22

separation of the custody of assets from accounting

Answer 22

you have to have a different person for the one who gets the cash and who records the cash to get rid of fraud

Question 23

Independent checks on performance

Answer 23

there must be someone who checks other people’s work to verify accuracy and integrity