Questions and Answers
What is a fiscal period?
The length of time for which a business summarizes and reports financial information.
What is a work sheet in accounting?
A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.
What does a trial balance demonstrate?
A proof of equality of debits and credits in a general ledger.
What are adjustments in accounting?
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What is a balance sheet?
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What does an income statement show?
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What defines net income?
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What is net loss?
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An accounting period is also known as a fiscal period.
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Journals, ledgers, and work sheets are considered permanent records.
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All general ledger account titles are listed on a trial balance in the same order as listed on the chart of accounts.
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The four questions asked when analyzing an adjustment are: Why? Where? When? and How?
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The two accounts affected by the adjustment for supplies are Supplies and Supplies Expense.
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If errors are found on a work sheet, they must be erased and corrected before any further work is completed.
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When two column totals are not in balance on the work sheet, the difference between the two totals is calculated and checked.
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Which of the following generally represents a net loss?
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A work sheet is ______________.
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What is the purpose of the trial balance?
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What row is included in the work sheet that is not an account title?
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If debits and credits are off by a number divisible by nine on the worksheet, you should first ______
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What accounting concept says to record revenue and expenses the same way from year to year?
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Which accounts are included on the work sheet?
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What will appear in the balance sheet and income statement section?
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Net income or loss will appear in the ______ of the worksheet.
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Study Notes
Key Accounting Concepts
- Fiscal Period: Represents the time frame for summarizing and reporting financial data.
- Work Sheet: A structured form for summarizing general ledger data essential for creating financial statements.
- Trial Balance: Serves as a verification tool ensuring total debits equal total credits in the general ledger.
Financial Statements
- Balance Sheet: Details assets, liabilities, and owner's equity at a specific moment in time.
- Income Statement: Reflects the financial performance over a fiscal period, including revenue and expenses.
- Net Income: Occurs when total revenue surpasses total expenses, indicating profitability.
- Net Loss: Arises when total expenses exceed total revenue, indicating a financial setback.
Accounting Adjustments
- Adjustments: Modifications made on the work sheet to reflect accurate general ledger accounts at the fiscal period's close.
- Adjustment for supplies affects both the Supplies and Supplies Expense accounts.
- Common adjustments include changes for Prepaid Insurance impacting related accounts.
Importance of Accurate Reporting
- Consistent Reporting Concept emphasizes the necessity of uniformity in recording revenue and expenses year after year.
- Errors identified in the work sheet must be corrected before continuing further calculations or processes.
- Accuracy in financial records is crucial, with common errors often stemming from arithmetic calculations.
Miscellaneous Accounting Principles
- Work sheets are not permanent records; they are tools for summarizing data for financial reporting.
- Totaling the adjustments columns is vital to confirm the balance of debits and credits.
- The accounting cycle includes the preparation of correcting entries, but they are not always a standard part of routine processes.
Common Errors and Corrections
- If debit and credit totals misalign by a number divisible by nine, this often points to addition errors.
- Ensuring all general ledger account balances are correctly documented in the trial balance is essential to avoid discrepancies.
- It's recommended to utilize calculators to mitigate errors during arithmetic tasks.
Formatting and Presentation
- Financial statements should begin with the appropriate heading format, specifying the date range, e.g., "For Month Ended [date]."
- The balance sheet's asset account balances should be recorded in the debit column while liabilities and equity are noted in the credit column.
Final Notes
- The net income or loss row is included in the work sheet but is not considered an account title.
- A trial balance is primarily used to prove that debits equal credits and ensure accuracy in financial reporting.
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Description
Master key terms from Accounting 1, Chapter 6 with these flashcards. This quiz covers essential definitions such as fiscal period, worksheets, and trial balances to help reinforce your understanding of financial reporting concepts. Perfect for test preparation and quick reviews.
