FAR Module 1 Quiz and Flashcards for Accounting

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Questions and Answers

Who is considered the father of accounting?

Cotrugli

Fr.Luca Pacioli (correct)

A financial analyst

An Italian businessman

What is the primary function of accounting?

To analyze financial statements

To prepare financial reports (correct)

To record business transactions

To make investment decisions

What is the term for an activity or event taking place in a business, expressed in terms of money?

Business event

Economic activity

Transaction (correct)

Financial statement

What is the purpose of financial statements?

To communicate vital financial information Signup and view all the answers

What is the book where the double entry bookkeeping system could be traced?

Summa de Aritmetica Signup and view all the answers

What is the definition of accounting?

The service activity that provides financial information Signup and view all the answers

What is the nature of a business?

An economic unit that is engaged in buying and selling of goods or services Signup and view all the answers

What is the role of accounting in business?

To bridge the gap between the business and the parties interested in the business Signup and view all the answers

What is the primary purpose of posting in accounting?

To transfer entries from the journal to the ledger Signup and view all the answers

What is the ledger in accounting?

A book of final entry Signup and view all the answers

How do you open a ledger account?

By writing the account title at the top and the account number at the right hand corner Signup and view all the answers

What is the correct order of filling up the columns in a ledger account?

Date, Explanation, PR or JR, Debit, Credit, Balance Signup and view all the answers

Why do you need to indicate the journal page in the PR or JR column?

To know the journal entry from which the transaction was derived Signup and view all the answers

What is the correct manner of posting journal entries?

Posting the journal entries chronologically Signup and view all the answers

What is the purpose of the Explanation column in a ledger account?

To write a brief explanation of the transaction Signup and view all the answers

Why do you need to open the ledger accounts before posting journal entries?

To transfer the entries from the journal to the ledger Signup and view all the answers

What is the primary purpose of identifying the events to be recorded in the first step of the accounting cycle?

To gather information about transactions or events from source documents Signup and view all the answers

What is the purpose of posting the journal entries to the accounts in the ledger?

To transfer information from the journal to the ledger for classification purposes Signup and view all the answers

What is the purpose of preparing the trial balance?

To verify or check the equality of the debits and credits in the ledger Signup and view all the answers

What is the end result of the accounting cycle?

The preparation of the financial statements Signup and view all the answers

What is the purpose of the analysis of transactions in the first step of the accounting cycle?

To identify the transaction from the source documents and do all of the above Signup and view all the answers

What is the purpose of preparing the worksheet?

To aid in the preparation of the financial statements Signup and view all the answers

What is the sequence of steps in the accounting cycle?

Identify events, record in journal, post to ledger, prepare trial balance, prepare financial statements Signup and view all the answers

What is the purpose of the accounting cycle?

To provide financial information that will help users or decision-makers Signup and view all the answers

Study Notes

Introduction to Accounting

Fr. Luca Pacioli is considered the father of accounting and was an Italian mathematician.
He prepared the book "Summa de Aritmetica" in 1494, which introduced the double entry bookkeeping system.
Cotrugli wrote the first accounting book in Naples.

Definition and Nature of Accounting

Accounting is a service activity that prepares financial reports to provide relevant financial information for informed economic decisions.
Accounting can also be defined as the art of recording, classifying, and summarizing financial transactions and events.
Accounting bridges the gap between the business and interested parties.
Accounting is the language of business.

Transactions and Financial Statements

A transaction is an activity or event expressed in terms of money.
Financial statements communicate vital financial information about the business to stakeholders.

Business Nature and Organizations

A business is an economic unit engaged in buying and selling goods or services.

The Accounting Cycle

The accounting cycle refers to a series of sequential steps to accomplish the accounting process.
The steps in the accounting cycle are:
- Identify events to be recorded
- Record transactions in the journal
- Post journal entries to the ledger
- Prepare the trial balance
- Prepare the worksheet and financial statements

Posting Process

Posting is the process of transferring journal entries to the ledger.
The ledger is the book of final entry where transactions are last recorded.
To open a ledger account, write the account title, account number, and column headings (Date, Explanation, PR/JR, Debit, Credit, and Balance).
Journal entries are posted chronologically.

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Description

Test your knowledge of the introduction to accounting, including the history and definition of accounting, and the role of Fr. Luca Pacioli as the father of accounting.