Praxis 2 Business Education Content Knowledge 5101- Accounting Exam 2023

Praxis 2 Business Education Content Knowledge 5101- Accounting Exam 2023 Fundamental Accounting Equation - ANS-States that all assets= liabilities + owners' equity. It is used in double entry accounting and shown in the balance sheet, in which all assets can be added up as the equivalent of the liabilities and shareholders equality. Accounting Cycle - ANS-Describes the steps taken in the accounting process. A sixstep procedure that results in the preparation and analysis of the major financial statements. Journals - ANS-Important in the accounting cycle. When a transaction occurs it is initially put into this cycle, base on when transaction occurs. Ledgers - ANS-After journal cycle, the information is transferred into this cycle. It contains different accounts like asset accounts, revenue accounts, expense accounts, liability accounts, and equity accounts. Double- Entry Bookkeeping - ANS-Bookkeepers record all transactions in two places so they can check one list of transactions against the other for accuracy. Two columns are used, all of the debits are placed on the left while the credits go on the right. Credits - ANS-decrease assets and increase liabilities Debts - ANS-money that is owed to someone else Debits - ANS-increase assets and decrease liabilities Trial Balances - ANS-A document showing the ending balances of ledger accounts. It is done on a certain date as the company is preparing to create financial documents. On the top is the title, entity, and accounting period. Then the account titles are listed. Then there is a list of the debits (assets and expenses) on the left and a list of the credits (liabilities, income, and equity) on the right. The sum of the credits and debits are at the bottom. If everything is correct, these numbers should match, although they can still be inaccurate even if they do match. This can happen if incorrect entries were put into both the debit and credit sections at the same time, or if something was omitted altogether. Still, if they do not match, there is definitely a problem, and the company has a chance to investigate and fix it before creating the financial documents. If the company prepared the financial documents and then noticed the error, then the accountants would have to redo the documents, a much more arduous and time-consuming process. Accountants use the trial balance when making the financial documents. Income Statements - ANS-accounting statements, also called "profit and loss statements," that show what has happened to an organization's income, expenses, and net profit over a period of time. Balance Sheets - ANS-a financial statement that sums up a firm's financial position on a particular day, usually the end of a quarter or year. It is a snapshot showing the financial situation of the company. Statements of Retained Earnings - ANS-A very important financial document required when income statements and comparative balance sheets are given. It showcases how a business' retained earnings change over a period of time. Statements of Cash Flow - ANS-explains how the company's cash changed from the beginning of the accounting period to the end. It is a major accounting document that outlines the inflow and outflow of cash from a company. Financial Ratios - ANS-calculations typically used to track a business's liquidity (cash), efficiency, and profitability over time compared to other businesses in its industry Payroll Records - ANS-documentation used to process earnings payments and record each employee's pay history. Payroll records contain information on all employees of the company, their compensation, and benefits. Payroll Accounting Procedures - ANS-Ensures accurate compensation and reporting. First, a company must have a way to compute the amount of time an employee works. Sometimes this is set to a schedule, whereas other times an hourly employee works different hours every day. A time card or electronic time clock may be used to keep track of this. Sometimes, employees keep their own records or are salaried and receive the same amount no matter how many hours they work. The pay must then be computed for each person. This may be a set amount based on a salary, or be the number of hours worked multiplied by the hourly rate. It may be more complicated and include other things such as investment account distributions, bonuses, or reimbursements. They must have a system to account for special time such as when the employee is taking paid leave. The company must compute and submit all applicable taxes such as income taxes on behalf of the employee and payroll taxes. They must make other deductions such as healthcare premiums. Once this is worked out, the company will distribute the money. This is often done by check or direct deposit. Periodic Inventory System - CONTINUES...