Accounting Principles: Cycle and Books Part 1
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Questions and Answers

What type of transaction does paying PHP10,000 for rental on Jan 3, 2016 represent?

  • Expense (correct)
  • Owner's equity
  • Asset
  • Liability

When preparing a chart of accounts, which of the following is the correct order to list accounts?

  • Liabilities, Assets, Equity, Income, Expenses
  • Assets, Equity, Expenses, Income, Liabilities
  • Assets, Liabilities, Owner’s Equity, Income, Expenses (correct)
  • Income, Expenses, Owner’s Equity, Assets, Liabilities

What was the amount collected from accounts receivable on Jan 17, 2016?

  • PHP15,600
  • PHP10,000
  • PHP30,000
  • PHP20,000 (correct)

In the transaction where PHP2,000 of accounts payable was paid on Jan 28, 2016, which type of account is affected?

<p>Liability (D)</p> Signup and view all the answers

Following the transaction of purchasing office equipment for PHP20,000 with a 40% down payment, how much was the down payment?

<p>PHP8,000 (B)</p> Signup and view all the answers

What account would you use for items that are held for sale?

<p>Inventory (B)</p> Signup and view all the answers

Which account should not be used for debts incurred in business?

<p>Owner’s Capital (D)</p> Signup and view all the answers

How should amounts from the journal be transferred to the ledger?

<p>Debits and credits are posted according to their type (D)</p> Signup and view all the answers

Which option accurately describes 'Salaries Expense'?

<p>An account for salaries incurred, irrespective of payment (D)</p> Signup and view all the answers

What is the account code for Cash?

<p>1000 (C)</p> Signup and view all the answers

Which account is used to represent obligations to pay employees in the future?

<p>Salaries Payable (B)</p> Signup and view all the answers

Which of the following accounts should be used for cash transactions?

<p>Cash (B)</p> Signup and view all the answers

What type of account is 'Service Revenue' classified as?

<p>Income (B)</p> Signup and view all the answers

What is the purpose of the Cash Receipts Journal?

<p>To document all cash received by the business (C)</p> Signup and view all the answers

Which source document is used for recording transactions in the Sales Journal?

<p>Charge Invoices (D)</p> Signup and view all the answers

What does the Purchase Journal specifically record?

<p>Purchases of inventory on account (A)</p> Signup and view all the answers

How is the General Ledger categorized in accounting?

<p>As a controlling account for financial statement preparation (C)</p> Signup and view all the answers

Which of the following statements about the Subsidiary Ledger is true?

<p>It includes independent data pertinent to a specific general ledger account. (C)</p> Signup and view all the answers

What type of transactions are recorded in the Cash Disbursements Journal?

<p>Cash payments made by the business (B)</p> Signup and view all the answers

Which of the following best describes the function of the Ledger?

<p>To post the balances recorded in journals for financial statement preparation (C)</p> Signup and view all the answers

What is a Charge Invoice used for in the context of the Sales and Purchase Journals?

<p>It serves as a source document for recording sales or purchases made on credit. (D)</p> Signup and view all the answers

What is one purpose of inserting the account number in the journal reference column?

<p>To serve as a cross-reference between records (A)</p> Signup and view all the answers

Which of the following is a step involved in posting to the ledger?

<p>Transferring journalized transactions to the general ledger (C)</p> Signup and view all the answers

What does the unadjusted trial balance involve?

<p>Copying account names and balances to a worksheet (D)</p> Signup and view all the answers

What type of ledger is referenced for posting transactions in the procedures?

<p>Three-column ledger (D)</p> Signup and view all the answers

What indicates that posting is completed in the journal?

<p>Writing the account number (D)</p> Signup and view all the answers

In which column of the ledger should the journal's page number be placed?

<p>Reference column (A)</p> Signup and view all the answers

What is the goal when preparing the unadjusted trial balance?

<p>To ensure accounts are accurate and complete (C)</p> Signup and view all the answers

How many columns are specifically mentioned for use in the ledger?

<p>Three columns (B)</p> Signup and view all the answers

Which financial transaction does not need to be recorded in the accounting cycle?

<p>Hiring a new employee (C)</p> Signup and view all the answers

What is the first step of the accounting cycle?

<p>Transactions and/or events (D)</p> Signup and view all the answers

In the journalizing process, which account is listed first?

<p>The debited account (C)</p> Signup and view all the answers

How should debits and credits be recorded in the journal?

<p>The amounts of debits must equal the amounts of credits. (B)</p> Signup and view all the answers

Which of the following transactions is an example of a financial transaction?

<p>Payment of monthly rental (D)</p> Signup and view all the answers

What document is not required during the analysis step of financial transactions?

<p>Employment contracts (C)</p> Signup and view all the answers

Which statement about financial transactions is NOT true?

<p>They include employee terminations. (C)</p> Signup and view all the answers

How many pieces of mugs were purchased on account for PHP12,400?

<p>1,000 pieces (A)</p> Signup and view all the answers

What is the correct journal entry for Pedro Matapang's initial investment in his business on February 14, 2016?

<p>Debit Cash PHP200,000; Credit Capital PHP200,000 (B)</p> Signup and view all the answers

What should be recorded for the purchase of the computer unit from XY Computer Store on February 15, 2016?

<p>Debit Equipment PHP25,000; Credit Cash PHP25,000 (A)</p> Signup and view all the answers

Which transaction does not require a journal entry?

<p>Hiring an employee (B)</p> Signup and view all the answers

What is the proper entry for the service rendered to Jean on February 17, 2016?

<p>Debit Cash PHP10,000; Credit Service Revenue PHP10,000 (C)</p> Signup and view all the answers

How should the repair performed for Mike on February 18, 2016, be recorded?

<p>Debit Accounts Receivable PHP15,000; Credit Service Revenue PHP15,000 (A)</p> Signup and view all the answers

What journal entry should be made for the purchase of office supplies on account on February 19, 2016?

<p>Debit Office Supplies PHP5,000; Credit Accounts Payable PHP5,000 (A)</p> Signup and view all the answers

What should be recorded when Pedro pays Juana's salary on February 25, 2016?

<p>Debit Salary Expense PHP4,000; Credit Cash PHP4,000 (A)</p> Signup and view all the answers

What would be the journal entry for the cash received from a customer for services rendered on January 4, 2016?

<p>Debit Cash PHP20,000; Credit Service Revenue PHP20,000 (B)</p> Signup and view all the answers

Flashcards

Cash Receipts Journal

A special journal used to record all cash received by a business.

Cash Disbursements Journal

A special journal used to record all cash payments made by a business.

Sales Journal

A special journal used to record all credit sales made by a business.

Purchase Journal

A special journal used to record all credit purchases made by a business.

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Ledger

An accounting book that contains all accounts and their balances, periodically updated from the journal.

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General Ledger (GL)

A grouping of all accounts used in preparing financial statements.

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Subsidiary Ledger

A group of like accounts that provides detailed information for a specific general ledger account.

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What is the source document for the Purchase Journal?

The charge invoice from the supplier or vendor.

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Journal Entry

A record of a business transaction that shows the accounts affected and the amounts of the debits and credits. It provides a chronological history of the transactions in a business.

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Debit

An entry on the left side of an account that increases asset, expense, and dividend accounts, and decreases liability, owner's equity, and revenue accounts.

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Credit

An entry on the right side of an account that decreases asset, expense, and dividend accounts, and increases liability, owner's equity, and revenue accounts.

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Chart of Accounts

A listing of all the accounts used by a business to organize and track its financial transactions.

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Assets

Resources owned by a business that have a future economic value, such as cash, equipment, and inventory.

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What is a journal entry?

A record of a financial transaction in a company's accounting system. Each entry has a date, description, and debit & credit amounts for specific accounts.

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Owner's Investment

The initial capital contributed by the owner to start a business, increasing owner's equity.

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Cash

The most liquid asset, representing money on hand.

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Computer Equipment

A fixed asset used in a business, specifically computers.

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Accounts Receivable

Money owed by customers for services rendered on credit.

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Accounts Payable

Money owed to suppliers for goods and services purchased on credit.

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Accounting Cycle

A continuous process of gathering, summarizing, and reporting financial information.

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Financial Transactions

Activities that change the value of assets, liabilities, or equity. They are measurable and recorded in accounting.

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Non-Financial Transactions

Activities that do not affect assets, liabilities, or equity. They are not recorded in accounting records.

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Journalizing

Recording financial transactions in the accounting records using specialized journals and the general journal.

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Debits (DR)

Entries on the left side of an accounting journal that represent increases in assets and expenses, or decreases in liabilities and equity.

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Credits (CR)

Entries on the right side of an accounting journal that represent decreases in assets and expenses, or increases in liabilities and equity.

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Rules of Debit and Credit

The sum of debits must always equal the sum of credits in accounting entries.

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Books of Original Entry

Specialized journals like the general journal where financial transactions are initially recorded.

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Liability

A debt or obligation that a business owes to others.

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Owner's Equity

The owner's investment in the business, representing the difference between assets and liabilities.

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Income

Revenue earned by the business from its operations.

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Expense

Costs incurred by the business in carrying out its operations.

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Posting to the Ledger

The process of transferring information from the journal (a record of transactions) to the ledger (a collection of accounts).

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Debit and Credit

Two sides of an accounting entry representing increases or decreases in accounts. Debits increase asset and expense accounts and decrease liability and equity accounts. Credits increase liability and equity accounts and decrease asset and expense accounts.

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Journal Reference Column

The column in the journal where you note the page number of the ledger where the corresponding transaction is recorded.

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Ledger Reference Column

The column in the ledger where you note the account number from the journal where the transaction is posted.

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Cross-Reference

Connecting two different records (journal and ledger) by using a reference number.

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Posting Completed

The process of transferring information from the journal to the ledger is finished.

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Unadjusted Trial Balance

A list of all account balances at the end of an accounting period before adjustments are made.

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Worksheet

A temporary document used in the accounting process to organize and summarize financial information.

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General Ledger

A collection of all the accounts of a business, organized by account type (assets, liabilities, equity, revenue, expenses).

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Reporting Date

The specific date at which an accounting period ends.

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Study Notes

Accounting Principles: Book of Accounts and Accounting Cycle Part 1

  • The accounting cycle is a continuous process for accumulating, summarizing, and reporting financial information.

  • The cycle includes steps like transactions, journal entries, posting, trial balance, worksheet, adjusting journal entries, financial statements, and closing the books.

  • The two major types of books of accounts include the journal and the ledger.

  • The journal serves as the book of original entry, recording transactions in chronological order. Entries include debit and credit effects on specific accounts.

  • A journal entry gives a detailed image of the impact of a transaction.

  • A journal provides a chronological record and comparison of debit and credit amounts to help prevent errors.

  • The general journal is the most fundamental type of journal. It records all transactions, typically including date, account title, explanation, reference, debit, and credits.

  • Specialized journals (e.g., cash receipts, cash disbursements, sales, purchases) document specific kinds of transactions (e.g. all cash received, cash payments)

  • The ledger is a book of final entry where account balances from the journal are periodically posted. The ledger is sometimes called the T-account because its basic format looks like the letter "T".

  • The general ledger groups all accounts for financial statement preparation; it's a controlling account summarizing subsidiary ledger activities.

  • A subsidiary ledger provides specific details of a general ledger account. For example, accounts payable to various suppliers are maintained in a subsidiary account for Accounts Payable.

  • A chart of accounts is important for financial record-keeping; it lists all accounts used by businesses.

  • The chart of accounts is critical for preparing financial statements and has a standardized order to follow, starting with assets, then liabilities, owner's equity, incomes, and expenses.

  • Steps for building the chart of accounts: Create three columns, list assets, liabilities, equity, income, expenses into the first column, select the account code for each in the second column, and then write a description for each account as to when to use it. Codes are customizable.

  • Detailed posting procedures are covered elsewhere in the presentation.

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Accounting Principles Book of Accounts and Accounting Cycle Part 1 PDF

Description

Explore the fundamental concepts of the accounting cycle and the types of books of accounts in this quiz. Learn about the essential steps involved in recording financial transactions, including journal entries and ledgers. This quiz serves as a guide to understanding the chronological processes that prevent errors in accounting.

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