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?

Liability 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?

PHP8,000 Signup and view all the answers

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

Inventory Signup and view all the answers

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

Owner’s Capital Signup and view all the answers

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

Debits and credits are posted according to their type Signup and view all the answers

Which option accurately describes 'Salaries Expense'?

An account for salaries incurred, irrespective of payment Signup and view all the answers

What is the account code for Cash?

1000 Signup and view all the answers

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

Salaries Payable Signup and view all the answers

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

Cash Signup and view all the answers

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

Income Signup and view all the answers

What is the purpose of the Cash Receipts Journal?

To document all cash received by the business Signup and view all the answers

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

Charge Invoices Signup and view all the answers

What does the Purchase Journal specifically record?

Purchases of inventory on account Signup and view all the answers

How is the General Ledger categorized in accounting?

As a controlling account for financial statement preparation Signup and view all the answers

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

It includes independent data pertinent to a specific general ledger account. Signup and view all the answers

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

Cash payments made by the business Signup and view all the answers

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

To post the balances recorded in journals for financial statement preparation Signup and view all the answers

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

It serves as a source document for recording sales or purchases made on credit. Signup and view all the answers

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

To serve as a cross-reference between records Signup and view all the answers

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

Transferring journalized transactions to the general ledger Signup and view all the answers

What does the unadjusted trial balance involve?

Copying account names and balances to a worksheet Signup and view all the answers

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

Three-column ledger Signup and view all the answers

What indicates that posting is completed in the journal?

Writing the account number Signup and view all the answers

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

Reference column Signup and view all the answers

What is the goal when preparing the unadjusted trial balance?

To ensure accounts are accurate and complete Signup and view all the answers

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

Three columns Signup and view all the answers

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

Hiring a new employee Signup and view all the answers

What is the first step of the accounting cycle?

Transactions and/or events Signup and view all the answers

In the journalizing process, which account is listed first?

The debited account Signup and view all the answers

How should debits and credits be recorded in the journal?

The amounts of debits must equal the amounts of credits. Signup and view all the answers

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

Payment of monthly rental Signup and view all the answers

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

Employment contracts Signup and view all the answers

Which statement about financial transactions is NOT true?

They include employee terminations. Signup and view all the answers

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

1,000 pieces 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?

Debit Cash PHP200,000; Credit Capital PHP200,000 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?

Debit Equipment PHP25,000; Credit Cash PHP25,000 Signup and view all the answers

Which transaction does not require a journal entry?

Hiring an employee Signup and view all the answers

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

Debit Cash PHP10,000; Credit Service Revenue PHP10,000 Signup and view all the answers

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

Debit Accounts Receivable PHP15,000; Credit Service Revenue PHP15,000 Signup and view all the answers

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

Debit Office Supplies PHP5,000; Credit Accounts Payable PHP5,000 Signup and view all the answers

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

Debit Salary Expense PHP4,000; Credit Cash PHP4,000 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?

Debit Cash PHP20,000; Credit Service Revenue PHP20,000 Signup and view all the answers

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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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.