ACG 3101 EXAM 1 QUESTIONS AND
ANSWERS 100% CORRECT
Steps of the Accounting Processing Cycle - CORRECT ANSWER- The Accounting
Cycle Process: Steps 1& 2
{During the accounting cycle}
Identify external transactions affecting the accounting equation.
Obtain information about transactions from source documents Ex. sales invoices, bills
from suppliers, cash register tapes.
Identify the date and nature of each transaction, the participating parties, and the
monetary terms.
Analyze transactions
Transaction analysis: The process of reviewing the source documents to determine the
dual effect on the accounting equation and the specific elements involved.
Step 3: Record the Transaction in a Journal
Journals:
-Provide a chronlogigical record of all economic events affecting a firm
- Each entry is expressed in terms of equal debits and credits
- Special Journal: Records a repetitive type of transaction. Ex. sales journal
- General Journal: ANy transaction not recorded in a special journal.
Perpetual Inventory System - CORRECT ANSWER- When inventory and cost of
goods sold accounts are continuously updated for purchase, sale, and return of
merchandise.
Periodic Inventory System
When inventory and cost of goods sold are updated at the end of the reporting
period.Usually used w/ small businesses.
Physically counting
Step 4: Posting
Balance Accounts
Assets on top, Liabilities in middle, Equity on the bottom
Step 5: Prepare for Unadjusted Trial Balnace
Unadjusted Trial Balance:
, List of the general ledger accounts along w/ their balances.
Purpose: To check for completeness and prove that accounting equation is in balance.
Total debit balances = total credit balances
Facilitates the preparation of adjusting entries.
Accounts listed in the order they appear in the general ledger.
Balance sheet items first before income statement items
Step 6: Record Adjusting Entries and Post to the Ledger Accounts
Record the effect of internal events on the accounting equation
Recorded at the end of any period when financial statements are prepared.
Objective: To implement the a - CORRECT ANSWER-
revenue of a giftcard is recognized when redeemed or expires
Accrued Liabilities: Represents obligations created when expenses have not been
incurred but will not be paid until subsequent reporting period. Ex. Accrued salaries
payable, accrued interest payable, etc.
Current Maturities if Long-Term Debt: Long-term notes, loans, mortgages, and bonds
payvle that either:
Become payable w/in the next year
Are notes payable installment
Contra Asset
Allowance for uncollectible accounts: Has a normal credit balance
Long-Term Liabilities
Settled in more than one year (or operating cycle if longer) after the balance sheet date.
Impact on future cash flows, and long-term solvency.
Shareholder's Equity
Owner's equity is total assets minus total liability:
Assets - Liabilities = SE
Arises primarily from:
Paid in capital
Retained earnings
*Sometimes referred to as nets assets or book value
*Includes other equity compknents - CORRECT ANSWER-
Important roles of accounting: - CORRECT ANSWER- -produce good decisions
-fosters a prosperous society
Primary Focus of Financial Accounting - CORRECT ANSWER- Provides financial
information to various external users. Used to predict future risk and potential return of
investments or loans before supplying capital to businesses.
ANSWERS 100% CORRECT
Steps of the Accounting Processing Cycle - CORRECT ANSWER- The Accounting
Cycle Process: Steps 1& 2
{During the accounting cycle}
Identify external transactions affecting the accounting equation.
Obtain information about transactions from source documents Ex. sales invoices, bills
from suppliers, cash register tapes.
Identify the date and nature of each transaction, the participating parties, and the
monetary terms.
Analyze transactions
Transaction analysis: The process of reviewing the source documents to determine the
dual effect on the accounting equation and the specific elements involved.
Step 3: Record the Transaction in a Journal
Journals:
-Provide a chronlogigical record of all economic events affecting a firm
- Each entry is expressed in terms of equal debits and credits
- Special Journal: Records a repetitive type of transaction. Ex. sales journal
- General Journal: ANy transaction not recorded in a special journal.
Perpetual Inventory System - CORRECT ANSWER- When inventory and cost of
goods sold accounts are continuously updated for purchase, sale, and return of
merchandise.
Periodic Inventory System
When inventory and cost of goods sold are updated at the end of the reporting
period.Usually used w/ small businesses.
Physically counting
Step 4: Posting
Balance Accounts
Assets on top, Liabilities in middle, Equity on the bottom
Step 5: Prepare for Unadjusted Trial Balnace
Unadjusted Trial Balance:
, List of the general ledger accounts along w/ their balances.
Purpose: To check for completeness and prove that accounting equation is in balance.
Total debit balances = total credit balances
Facilitates the preparation of adjusting entries.
Accounts listed in the order they appear in the general ledger.
Balance sheet items first before income statement items
Step 6: Record Adjusting Entries and Post to the Ledger Accounts
Record the effect of internal events on the accounting equation
Recorded at the end of any period when financial statements are prepared.
Objective: To implement the a - CORRECT ANSWER-
revenue of a giftcard is recognized when redeemed or expires
Accrued Liabilities: Represents obligations created when expenses have not been
incurred but will not be paid until subsequent reporting period. Ex. Accrued salaries
payable, accrued interest payable, etc.
Current Maturities if Long-Term Debt: Long-term notes, loans, mortgages, and bonds
payvle that either:
Become payable w/in the next year
Are notes payable installment
Contra Asset
Allowance for uncollectible accounts: Has a normal credit balance
Long-Term Liabilities
Settled in more than one year (or operating cycle if longer) after the balance sheet date.
Impact on future cash flows, and long-term solvency.
Shareholder's Equity
Owner's equity is total assets minus total liability:
Assets - Liabilities = SE
Arises primarily from:
Paid in capital
Retained earnings
*Sometimes referred to as nets assets or book value
*Includes other equity compknents - CORRECT ANSWER-
Important roles of accounting: - CORRECT ANSWER- -produce good decisions
-fosters a prosperous society
Primary Focus of Financial Accounting - CORRECT ANSWER- Provides financial
information to various external users. Used to predict future risk and potential return of
investments or loans before supplying capital to businesses.
