The Accounting Cycle Flashcards
Learn about the accounting cycle
_______ _______ is the process of identifying, recording, summarizing and analyzing an entity’s financial transactions and reporting them in financial statements.
Financial accounting
Financial accounting is the process of _______, _______, _______ and _______ an entity’s financial transactions and reporting them in financial statements.
Identifying, recording, summarizing and analyzing
Financial accounting is the process of identifying, recording, summarizing and analyzing an entity’s _______ _______ and reporting them in financial statements.
financial transactions
Financial accounting is the process of identifying, recording, summarizing and analyzing an entity’s financial transactions and reporting them in _______ _______.
financial statements
What is the first step in the accounting cycle?
identify transactions
What is the second step in the accounting cycle?
prepare journal entries
What does “double-entry” accounting imply?
That each transaction affects at least two accounts
What is a journal entry?
A record of a financial transaction
Debits and credits should always _______ each other.
equal
The core principle of _______ _______: the stuff that your business owns is equal to the stuff that your business owes.
financial accounting
The core principle of financial accounting: the stuff that your business _______ is equal to the stuff that your business _______.
owns, owes
The core principle of financial accounting: the stuff that your business owns is _______ to the stuff that your business owes.
equal
Give two examples of assets.
cash and inventory
The stuff that your business owes is made up of _______ and _______.
liabilities and equity
The stuff that your business _______ is made up of liabilities and equity.
owes
Liabilities are owed to _______ _______.
third parties
_______ are owed to third parties.
Liabilities
Liabilities are _______ to third parties.
owed
_______ is owed to owners.
Equity
Equity is owed to _______.
owners
Equity is _______ to owners.
owed
_______ is your claim on the business’s net assets.
Equity
Equity is your _______ on the business’s net assets.
claim
Equity is your claim on the business’s net _______.
assets
What is the accounting equation?
Assets = Liabilities + Equity
_______ represent the sources that economic benefit flows from.
Credits
Credits represent the _______ that economic benefit flows _______.
sources, from
_______ represent the destinations that economic benefit flows to.
Debits
Debits represent the _______ that economic benefit flows _______.
destinations, to
Credits represent the sources that _______ _______ flows from.
economic benefit
Debits represent the destinations that _______ _______ flows to.
economic benefit
What is the third step in the accounting cycle?
Post to general ledger
The _______ _______ is a database that stores a complete record of all accounts and journal entries.
general ledger
The general ledger is a _______ that stores a complete record of all accounts and journal entries.
database
The general ledger is a database that stores a complete _______ of all accounts and journal entries.
record
The general ledger is a database that stores a complete record of all _______ and _______ _______.
accounts and journal entries
An _______ is the place where we record, sort, and store all financial transactions that affect a related group of items.
account
An account is the place where we _______, _______, and _______ all financial transactions that affect a related group of items.
record, sort, and store
An account is the place where we record, sort, and store all _______ _______ that affect a related group of items.
financial transactions
Broadly speaking, there are _______ types of accounts.
six
Name the six types of accounts.
(1) Assets (2) Liabilities (3) Equity (4) Revenue (5) Expenses (6) Dividends (aka Withdrawals)
_______, _______ and _______ are part of the equity portion of the accounting equation.
Revenue, expenses, and dividends
Revenue, expenses and dividends are part of the _______ portion of the accounting equation.
equity
Revenue, expenses and dividends are part of the equity portion of the _______ _______.
accounting equation
What is the fourth step in the accounting cycle?
Prepare unadjusted trial balance
A _______ _______ is an internal accounting report showing the closing balance of all general ledger accounts.
trial balance
A trial balance is an _______ accounting report showing the closing balance of all general ledger accounts.
internal
A trial balance is an internal _______ _______ showing the closing balance of all general ledger accounts.
accounting report
A trial balance is an internal accounting report showing the _______ _______ of all general ledger accounts.
closing balance
A trial balance is an internal accounting report showing the closing balance of all _______ _______ accounts.
general ledger
A _______ _______ can help us check for errors, but its primary purpose is to be used in making financial statements.
trial balance
A trial balance can help us check for _______, but its primary purpose is to be used in making financial statements.
errors
A trial balance can help us check for errors, but its primary purpose is to be used in making _______ _______.
financial statements
A _______ _______ consists of all of your accounts and their closing balances.
trial balance
A trial balance consists of all of your _______ and their closing balances.
accounts
A trial balance consists of all of your accounts and their _______ _______.
closing balances
A _______ _______ is the cumulative total of all transactions affecting an account.
closing balance
A closing balance is the _______ _______ of all transactions affecting an account.
cumulative total
A closing balance is the cumulative total of all _______ affecting an account.
transactions
A closing balance is the cumulative total of all transactions affecting an _______.
account
What is the fifth step in the accounting cycle?
Make adjusting entries
_______ _______ are journal entries posted at the end of an accounting period to bring a business’s books in line with the accrual method of accounting.
Adjusting entries
Adjusting entries are _______ entries posted at the end of an accounting period to bring a business’s books in line with the accrual method of accounting.
journal
Adjusting entries are journal entries posted at the _______ of an accounting period to bring a business’s books in line with the accrual method of accounting.
end
Adjusting entries are journal entries posted at the end of an _______ _______ to bring a business’s books in line with the accrual method of accounting.
accounting period
Adjusting entries are journal entries posted at the end of an accounting period to bring a business’s books in line with the _______ method of accounting.
accrual
The two main rulebooks of financial accounting are the _______ _______ _______ _______ (__ __ __ __) and the Generally Accepted Accounting Principles (GAAP).
International Financial Reporting Standards (IFRS)
The two main rulebooks of financial accounting are the International Financial Reporting Standards (IFRS) and the _______ _______ _______ _______ (__ __ __ __).
Generally Accepted Accounting Principles (GAAP)
Both _______ and _______ require you to follow the accrual method of accounting.
IFRS and GAAP
Both IFRS and GAAP require you to follow the _______ method of accounting.
accrual
In the _______ method, revenue is recognized as it is earned and expenses are recorded as they are incurred.
accrual
In the accrual method, _______ is recognized as it is earned and expenses are recorded as they are incurred.
revenue
In the accrual method, revenue is recognized as it is _______ and expenses are recorded as they are incurred.
earned
In the accrual method, revenue is recognized as it is earned and _______ are recorded as they are incurred.
expenses
In the accrual method, revenue is recognized as it is earned and expenses are recorded as they are _______.
incurred
What is the seventh step in the accounting cycle?
Create financial statements
What is the sixth step in the accounting cycle?
Prepare adjusted trial balance
_______ _______ are accounting reports that summarize a business’s activities over a period of time. These are external reports designed to give your investors, lenders, and creditors an understanding of your business’s financial health.
Financial statements
Financial statements are _______ _______ that summarize a business’s activities over a period of time. These are external reports designed to give your investors, lenders, and creditors an understanding of your business’s financial health.
accounting reports
Financial statements are accounting reports that summarize a business’s _______ over a period of time. These are external reports designed to give your investors, lenders, and creditors an understanding of your business’s financial health.
activities
Financial statements are accounting reports that summarize a business’s activities over a _______ of _______. These are external reports designed to give your investors, lenders, and creditors an understanding of your business’s financial health.
period of time
Financial statements are accounting reports that summarize a business’s activities over a period of time. These are _______ reports designed to give your investors, lenders, and creditors an understanding of your business’s financial health.
external
Financial statements are accounting reports that summarize a business’s activities over a period of time. These are external reports designed to give your _______, _______, and _______ an understanding of your business’s financial health.
investors, lenders, and creditors
Financial statements are accounting reports that summarize a business’s activities over a period of time. These are external reports designed to give your investors, lenders, and creditors an understanding of your business’s _______ _______.
financial health
The three main ________ _______ are the balance sheet, income statement, and cash flow statement.
financial statements
The three main financial statements are the _______ _______, _______ _______, and _______ _______ _______.
balance sheet, income statement, and cash flow statement
The three main _______ _______ can all be built using your adjusted trial balance.
financial statements
The three main financial statements can all be built using your _______ _______ _______.
adjusted trial balance
The _______ _______ gives us a snapshot of your business’s assets, liabilities, and equity as a single point in time, which can teach the readers about your financial position. They can see what you owe and what you own at the end of your financial year.
balance sheet
The balance sheet gives us a snapshot of your business’s _______, _______, and _______ as a single point in time, which can teach the readers about your financial position. They can see what you owe and what you own at the end of your financial year.
assets, liabilities, and equity
The balance sheet gives us a snapshot of your business’s assets, liabilities, and equity as a single point in time, which can teach the readers about your financial _______. They can see what you owe and what you own at the end of your financial year.
position
The balance sheet gives us a snapshot of your business’s assets, liabilities, and equity as a single point in time, which can teach the readers about your financial position. They can see what you _______ and what you _______ at the end of your financial year.
owe, own
The balance sheet gives us a snapshot of your business’s assets, liabilities, and equity as a single point in time, which can teach the readers about your financial position. They can see what you owe and what you own at the _______ of your financial year.
end
The balance sheet gives us a snapshot of your business’s assets, liabilities, and equity as a single point in time, which can teach the readers about your financial position. They can see what you owe and what you own at the end of your _______ _______.
financial year
The _______ _______ summarizes your business’s revenues and expenses over a period of time. It gives the readers a glimpse of your financial performance and profitability.
income statement
The income statement summarizes your business’s _______ and _______ over a period of time. It gives the readers a glimpse of your financial performance and profitability.
revenues and expenses
The income statement summarizes your business’s revenues and expenses over a period of time. It gives the readers a glimpse of your financial _______ and _______.
performance and profitability
_______ and ______ _______ are not the same, unless you are using the cash basis method of accounting.
Profit and cash flow
Profit and cash flow are _______ the same, unless you are using the cash basis method of accounting.
not
Profit and cash flow are not the same, unless you are using the _______ _______ method of accounting.
cash basis
The _______ _______ _______ summarizes your cash inflows and outflows over the same period of time.
cash flow statement
The cash flow statement summarizes your cash _______ and _______ over the same period of time.
inflows and outflows
What is the eighth step in the accounting cycle?
Post closing entries
A _______ _______ is a journal entry that transfers balances from temporary accounts to permanent accounts in the balance sheet.
closing entry
A closing entry is a _______ entry that transfers balances from temporary accounts to permanent accounts in the balance sheet.
journal
A closing entry is a journal entry that _______ balances from temporary accounts to permanent accounts in the balance sheet.
transfers
A closing entry is a journal entry that transfers _______ from temporary accounts to permanent accounts in the balance sheet.
balances
A closing entry is a journal entry that transfers balances from _______ accounts to _______ accounts in the balance sheet.
temporary, permanent
A closing entry is a journal entry that transfers balances from temporary accounts to permanent accounts in the _______ _______.
balance sheet
List all eight steps of the accounting cycle in order.
(1) identify transactions (2) prepare journal entries (3) post to general ledger (4) unadjusted trial balance (5) post adjusting entries (6) adjusted trial balance (7) create financial statements (8) post closing entries
