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Accounting Process Overview
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Accounting Process Overview

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Questions and Answers

What is the purpose of preparing a worksheet in financial statements?

  • To facilitate adjustments and preparation of financial statements (correct)
  • To summarize inventory balances
  • To calculate tax liabilities
  • To record cash transactions exclusively

    • What type of adjustment is made for income earned but not yet collected?

  • Amortization
  • Accrual (correct)
  • Deferral
  • Reclassification

    • In the proforma entries for expenses incurred but not yet paid, which accounts are involved?

  • Asset and Income
  • Income and Expense
  • Liability and Asset
  • Expense and Liability (correct)

    • What adjustment is reflected when advance payment for one year of rent is received?

    <p>Deferred Revenue</p> Signup and view all the answers

    For the advance payment of Php 600,000 for one year’s rent, what is the monthly rent recognized as income?

    <p>Php 50,000</p> Signup and view all the answers

    What is the first step in the accounting process?

    <p>Gathering Source Documents</p> Signup and view all the answers

    Which criterion is NOT necessary for a transaction to be recorded?

    <p>It must be in written form</p> Signup and view all the answers

    In a journal entry, what is the typical balance for assets?

    <p>Debit</p> Signup and view all the answers

    What effectively summarizes Mr.O's initial investment in the business?

    <p>Total assets of PHP 5,350,000</p> Signup and view all the answers

    What does the process of posting involve?

    <p>Transferring records to the Ledger</p> Signup and view all the answers

    What does not belong to the normal balance side for liabilities?

    <p>Debit</p> Signup and view all the answers

    When analyzing business transactions, what aspect is essential?

    <p>Exchange of values must be measured in money</p> Signup and view all the answers

    Which of the following is NOT a component of Mr.O's investment?

    <p>Stocks</p> Signup and view all the answers

    What is the formula for calculating Depreciation Expense per year?

    <p>Depreciation Expense = Depreciable Cost / Estimated Useful Life</p> Signup and view all the answers

    If an asset has an original acquisition cost of Php 5,100,000 and a salvage value of Php 100,000 with an estimated useful life of 20 years, what is the annual Depreciation Expense?

    <p>Php 250,000</p> Signup and view all the answers

    In the journal entry for depreciation, which account is credited?

    <p>Accumulated Depreciation</p> Signup and view all the answers

    What does the Allowance for Doubtful Accounts represent?

    <p>The amount expected to be uncollectible</p> Signup and view all the answers

    What approach uses a percentage of net sales to determine the Bad Debt Expense?

    <p>Income Statement approach</p> Signup and view all the answers

    Which of the following accounts is debited in the journal entry for bad debts?

    <p>Bad Debt Expense</p> Signup and view all the answers

    What is the relationship between Depreciable Cost and Salvage Value?

    <p>Depreciable Cost is greater than Salvage Value</p> Signup and view all the answers

    Which of the following is NOT an approach to determine the Allowance for Doubtful Accounts?

    <p>Percentage of Collections</p> Signup and view all the answers

    What is the total amount classified as Rent Expense by December 31 under the Asset method?

    <p>PHP 500,000</p> Signup and view all the answers

    Which total amount is debited to Prepaid Rent by March 1 under the Expense method?

    <p>PHP 600,000</p> Signup and view all the answers

    How many months are considered for rent expense when the reporting period ends on September 30?

    <p>7 months</p> Signup and view all the answers

    What is the monthly rent amount calculated from the total prepaid rent of PHP 600,000?

    <p>PHP 50,000</p> Signup and view all the answers

    Which entry shows the adjustment for Rent Expense for the period in the Asset method?

    <p>Debit Rent Expense, Credit Prepaid Rent</p> Signup and view all the answers

    What total is credited to Rent Expense under the Expense method on December 31?

    <p>PHP 100,000</p> Signup and view all the answers

    Which entry is made to record the initial prepaid rent under the Expense method?

    <p>Debit Rent Expense, Credit Cash</p> Signup and view all the answers

    If an asset is depreciable, what must happen to its expense over time?

    <p>It must be adjusted for depreciation expense regularly.</p> Signup and view all the answers

    What is the amount reported for Cash on Hand?

    <p>1,770,095.00</p> Signup and view all the answers

    How much is the total amount for Accounts Payable?

    <p>9,775.00</p> Signup and view all the answers

    What is the total amount for Utilities Expense after adjustments?

    <p>35,000.00</p> Signup and view all the answers

    What is the amount for Professional Fee listed?

    <p>430,500.00</p> Signup and view all the answers

    How much is accumulated depreciation for Delivery Equipment?

    <p>3,125.00</p> Signup and view all the answers

    What is the amount for Owner, Capital highlighted in the balances?

    <p>2,000,000.00</p> Signup and view all the answers

    What is the total amount of Salary Expense after adjustments?

    <p>100,000.00</p> Signup and view all the answers

    What is the amount for Loan Payable - Noncurrent?

    <p>500,000.00</p> Signup and view all the answers

    How much is the total for Accrued Expenses listed?

    <p>65,000.00</p> Signup and view all the answers

    What is the amount shown for Supplies before adjustments?

    <p>19,550.00</p> Signup and view all the answers

    What is the total adjusted balance for Cash in Bank?

    <p>580,500.00</p> Signup and view all the answers

    How much is the Depreciation Expense recorded?

    <p>4,743.33</p> Signup and view all the answers

    What amount is recorded for Accumulated Depreciation - Office Equipment?

    <p>910.00</p> Signup and view all the answers

    What is the amount for total debits in the Unadjusted Trial Balance?

    <p>3,240,275.00</p> Signup and view all the answers

    Study Notes

    Accounting Process

    • Gathering Source Documents: The process starts by creating a record of the transaction which is a business event that has a monetary value.
    • Analyzing Business Transactions: The key criteria for deciding whether to record a transaction are exchange of values, at least two parties involved, and the transaction must be expressed in monetary terms.
    • Journalizing: When a transaction is recognized as needing to be recorded, it must be journalized - recorded as a double-entry into the Journal, which is the book of original entry.
    • Posting: The next step in the process is to transfer the records from the Journal to the Ledger.
    • Preparation of Worksheet: This is a tool that helps adjust information and prepare financial statements to reflect the correct financial position of the business.
    • Journalizing and Posting of Adjustments: This step includes adjusting for accrued income and expenses as well as deferrals.
      • Accruals: Adjusting for income that has been earned but not collected yet.
      • Deferrals: Adjusting for income that has been collected but not yet earned.
    • Adjustment for Depreciation Expense: This adjustment is based on the useful life of an asset.
      • Depreciation Expense: Depreciable Cost * / Estimated Useful Life.
    • Adjusting for Bad Debts: Adjusting for doubtful accounts receivable.
      • Allowance for Doubtful Accounts: Based on the % of sales or the % of accounts receivable.

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    Related Documents

    Basic Accounting Principles and Process PDF

    Description

    This quiz covers the essential steps in the accounting process, including gathering source documents, analyzing transactions, journalizing, and posting. Additionally, it discusses the preparation of worksheets and adjustments necessary for accurate financial statements.

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