Podcast
Questions and Answers
What is the primary reason Sally cannot enter the $43.00 expense without a receipt?
What is the primary reason Sally cannot enter the $43.00 expense without a receipt?
Which of the following best describes an expense in accounting?
Which of the following best describes an expense in accounting?
If Carla used cash to buy pencils and pay an electricity bill, how should these transactions be classified?
If Carla used cash to buy pencils and pay an electricity bill, how should these transactions be classified?
What accounting principle suggests that transactions should be recorded based on their economic substance?
What accounting principle suggests that transactions should be recorded based on their economic substance?
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How much revenue did the store generate from cash sales?
How much revenue did the store generate from cash sales?
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Which expense was part of Carla's errands according to the given transactions?
Which expense was part of Carla's errands according to the given transactions?
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What amount did Carla spend on the electricity bill?
What amount did Carla spend on the electricity bill?
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What is the significance of recording transactions accurately in accounting?
What is the significance of recording transactions accurately in accounting?
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What is the primary goal of a bookkeeper before presenting financial statements?
What is the primary goal of a bookkeeper before presenting financial statements?
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Accruals occur when revenue is recognized under which scenario?
Accruals occur when revenue is recognized under which scenario?
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Deferrals are best described as which of the following?
Deferrals are best described as which of the following?
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How does an increase in expenses affect equity?
How does an increase in expenses affect equity?
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The reliability assumption in accounting requires transactions to be verifiable through which of the following?
The reliability assumption in accounting requires transactions to be verifiable through which of the following?
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What type of revenue are fees earned on investments categorized as?
What type of revenue are fees earned on investments categorized as?
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What accounting method must businesses with revenue over $25 million utilize?
What accounting method must businesses with revenue over $25 million utilize?
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The accounting cycle refers to which of the following?
The accounting cycle refers to which of the following?
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What step does Sally need to perform after receiving the statements for review?
What step does Sally need to perform after receiving the statements for review?
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Which of the following steps does Sally take first after receiving receipts and bills from Carla?
Which of the following steps does Sally take first after receiving receipts and bills from Carla?
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What action should Sally take if she identifies a mistake in the Trial Balance?
What action should Sally take if she identifies a mistake in the Trial Balance?
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What allows Sally to enter depreciation for the company’s long-term assets?
What allows Sally to enter depreciation for the company’s long-term assets?
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Which adjustment occurs prior to any payment being processed?
Which adjustment occurs prior to any payment being processed?
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When do deferrals typically occur within the accounting cycle?
When do deferrals typically occur within the accounting cycle?
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What are non-cash expense adjustments primarily used for?
What are non-cash expense adjustments primarily used for?
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Which step includes making adjustments related to accrued revenues?
Which step includes making adjustments related to accrued revenues?
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What were the total expenses and revenues in this scenario?
What were the total expenses and revenues in this scenario?
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Which account increased by $100?
Which account increased by $100?
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What is a significant difference between revenue and an asset?
What is a significant difference between revenue and an asset?
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Why is accrual accounting preferred over cash-basis accounting?
Why is accrual accounting preferred over cash-basis accounting?
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How much did Accounts Receivable increase in this scenario?
How much did Accounts Receivable increase in this scenario?
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Which expense increased significantly by $160?
Which expense increased significantly by $160?
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What method of accounting records income only when payment is received?
What method of accounting records income only when payment is received?
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What was the annual income of Pencil Pros?
What was the annual income of Pencil Pros?
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What document does Tera prepare to ensure Franky and Vinny understand their payment agreement?
What document does Tera prepare to ensure Franky and Vinny understand their payment agreement?
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Which type of account will Tera create to keep track of Vinny's payments for the van?
Which type of account will Tera create to keep track of Vinny's payments for the van?
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If Franky needs to write off the amount Vinny owes, where will this be recorded?
If Franky needs to write off the amount Vinny owes, where will this be recorded?
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What might cause accounts to become uncollectible?
What might cause accounts to become uncollectible?
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Which action can companies take to prevent paying taxes on revenue not received?
Which action can companies take to prevent paying taxes on revenue not received?
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What is likely to happen when a debtor stops making payments as Vinny did?
What is likely to happen when a debtor stops making payments as Vinny did?
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What is a common reason for accounts to become uncollectible aside from fraud?
What is a common reason for accounts to become uncollectible aside from fraud?
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Identifying uncollectible accounts helps companies manage what aspect of their finances?
Identifying uncollectible accounts helps companies manage what aspect of their finances?
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What is the value of the 2,750 fritters using the FIFO method?
What is the value of the 2,750 fritters using the FIFO method?
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Using the WAC method, what is the value of the 2,750 fritters in inventory?
Using the WAC method, what is the value of the 2,750 fritters in inventory?
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What is the value of the 4,750 fritters sold using the LIFO method?
What is the value of the 4,750 fritters sold using the LIFO method?
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According to the FIFO method, what is the total value of the fritters sold?
According to the FIFO method, what is the total value of the fritters sold?
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What key aspect must be consistent when choosing an inventory valuation method for tax purposes?
What key aspect must be consistent when choosing an inventory valuation method for tax purposes?
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Which inventory valuation method would typically result in the highest tax liability during periods of inflation?
Which inventory valuation method would typically result in the highest tax liability during periods of inflation?
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What is an example of inventory shrinkage?
What is an example of inventory shrinkage?
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Which of the following is true about inventory valuation methods?
Which of the following is true about inventory valuation methods?
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Study Notes
Accounting Cycle
- The accounting cycle is a series of steps taken by accountants and bookkeepers to record financial transactions and track a business's financial health.
- There are eight steps, though the names may vary between professionals.
- The first step is Transactions, analyzing business dealings and determining how they affect the company.
- The second step is Journal Entries, putting transactions into a transaction journal, ordered by date.
- The third step is General Ledger Post, copying journal entries into the appropriate accounts in the general ledger.
- The fourth step is Trial Balance, bringing all transactions into focus and exposing possible errors (assets = liabilities + owner's equity).
- The fifth step is Worksheet, identifying and rectifying errors in the trial balance.
- The sixth step is Adjusting Entries, recording changes that naturally occur during business but don't trigger a paper trail (accruals, deferrals, and depreciation).
- The seventh step is Financial Statements, preparing financial statements in a specific order: income statement, owner's equity statement, balance sheet, and statement of cash flows.
- The eighth step is Closing, totaling the books of the period in question and preventing future edits.
Adjusting Process
- Three main adjustments are made during adjusting entries: accruals, deferrals, non-cash expenses.
- Accruals occur before payment.
- Deferrals occur after payment.
- Non-cash expense adjustments are for depreciation & prior accounting cycle errors.
- Adjustments are performed at an accountant's request.
Accounting and Reporting Assumptions
- Set by the Financial Accounting Standards Board (FASB).
- Reliability: Companies must only record verifiable transactions.
- Consistency: The same accounting method should be used every period.
- Time Period: Accounting periods must remain consistent over time.
- Going Concern: Businesses are expected to remain operational.
- Economic Entity: Personal and business records are kept separate.
- Money Measurement: Transactions are recorded in monetary terms.
Transactions as Revenue or Expenses
- Revenue: Income earned from sales of goods or services.
- Expenses: Costs associated with everyday business operations.
Accrual vs. Cash-Basis Accounting
- Accrual: Records revenue and expenses as they occur, regardless of payment timing.
- Cash-basis: Records revenue and expenses when payment is made.
Notes Receivable and Uncollectible
- Notes Receivable: Long-term receivables created when payment isn't expected within a year.
- Uncollectible Accounts: Receivables a company no longer expects to collect due to fraud, bankruptcy, or lost contact.
Merchandise Inventory
- Merchandise inventory are goods intentionally stocked for sale. Companies providing services usually have less inventory than those selling goods. Items used as part of day to day operations are not typically considered inventory.
Inventory Valuation Methods
- Specific Identification: Tracks inventory items from receipt to sale
- FIFO (First-In, First-Out): Sells the oldest items first.
- LIFO (Last-In, First-Out): Sells the newest items first.
- Weighted Average Cost (WAC): Averages the prices of items purchased during the year.
Adjusting Inventory Balances
- Inventory balances are adjusted after a physical count, often at the end of a fiscal year.
- Inventory is not adjusted for appreciation or depreciation.
- Spoilage, theft or damage can cause inventory adjustments.
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Description
Explore the essential steps of the accounting cycle, which are critical for accountants and bookkeepers in recording financial transactions. From analyzing transactions to making adjusting entries, this quiz covers each phase in detail, helping you understand how to track a business's financial health effectively.
