Unit 4 - The Accounting Cycle

Question 1

What is the starting point of the business cycle?

Answer 1

Cash and working hard to collect more of it

Question 2

What do businesses do with cash in the business cycle?

Answer 2

They pay cash to buy goods and services and sell those goods and services to receive cash

Question 3

What does the accounting cycle report about an entity?

Answer 3

• Results of operations (income statement)
• Financial position (balance sheet)
• Cash flows (statement of cash flows)

Question 4

What processes are involved in the accounting cycle?

Answer 4

• Opening of accounts at the beginning of the accounting period
• Journalizing transactions during the accounting period
• Ledger balances
• Closing entries
• Financial statements

Question 5

What is Accrual Basis Accounting?

Answer 5

An accountant recognizes the impact of a business transaction as it occurs

Question 6

When does an accountant record a transaction under Accrual Basis Accounting?

Answer 6

When the business performs a service, makes a sale, or incurs an expense, regardless of cash flow

Question 7

What are Adjusting Entries?

Answer 7

Journal entries recorded to reflect the appropriate balances in various ledger accounts for a specific accounting period

Question 8

What are the types of Adjusting Entries?

Answer 8

• Accruals
• Deferrals

Question 9

What do Accruals refer to in accounting?

Answer 9

Unrecorded expenses or revenues and their subsequent adjusting entries

Question 10

True or False: The accounting cycle and business cycle are unrelated.

Answer 10

False

Question 11

Fill in the blank: The accounting cycle involves _____ of accounts at the beginning of the accounting period.

Answer 11

[opening]