test III: introduction to accounting and bookkeeping

Question 1

accounting department vs financing department

Answer 1

accounting department: daily transactions and reports

financing department: determining needs for funds, investing excess funds and raising capital for growth and expansion

Question 2

financial accounting vs management accounting

Answer 2

financial accounting: reports for outsiders

management accounting: reports for insiders

Question 3

work of accountants: bookkeeping

Answer 3

entry and organization of daily business transactions and the preparation of financial statements

Question 4

work of accountants: auditing

Answer 4

verification of financial statements to provide unbiased opinions on the authenticity of the financial data

Question 5

work of accountants: financial analysis

Answer 5

evaluation of a company’s performance for insiders and outsiders

Question 6

the language of accounting

Answer 6

• consistent and standardized so that it’s understandable and comparable
• GAAP

Question 7

the accounting process

Answer 7

1. journal
2. ledger
3. balance
4. financial statements

Question 8

journal

Answer 8

daily transactions in chronological order

debit = credit

Question 9

ledger

Answer 9

all individual accounts

transactions and final balance

Question 10

trial balance

Answer 10

the final balance of each account

all credit accounts must equal the credit accounts

Question 11

financial statements

Answer 11

displays the financial position of a firm at a precise date

1. income statement (final profit used in the statement of owner’s equity)
2. statement of owner’s equity (final total used in the balance sheet)
3. balance sheet

Question 12

the normal balance of accounts

Answer 12

asset accounts: debit 
liability accounts: credit 
capital accounts: credit 
revenue accounts: credit 
expense accounts: debit 
withdrawals accounts: debit

Question 13

journalizing

Answer 13

source document required (invoice): date, amount and invoice number

1. identify the transactions from the source document
2. identify each account affected by the transaction
3. apply rules of credit and debit
4. record the transactions in the journal with a description

Question 14

journal entries

Answer 14

date
title accounts debited and credited
short explanation

Question 15

double-entry accounting

Answer 15

impacts 2 accounts (one credited and one debited)

Question 16

posting to the ledger

Answer 16

individual accounts

computer tech software (ex.:: Sage)

Question 17

assets

Answer 17

increase: debit
decrease: credit

Question 18

liabilities

Answer 18

increase: credit
decrease: debit

Question 19

equity

Answer 19

increase: credit
decrease: debit

Question 20

equity: different accounts

Answer 20

expense: debit
revenues: credit
withdrawals: debit
deposits: credit (capital)