Accounting Cycle Actual Exam Questions With All Correct Answers

Accounting Cycle Actual Exam Questions With All Correct Answers Accounting process - ANSWER- is a sequence of interrelated procedures. Its primary purpose is to produce the entity's financial statements for a given reporting period Accounting cycle - ANSWER- refers to a series of sequential steps or procedures performed to accomplish the accounting process. Chart of Accounts - ANSWER- It is a list of account titles with corresponding account codes used by the business. This list guides the bookkeeper on what accounts to use when recording transactions in the journal. Double-Entry Bookkeeping - ANSWER- A debit entry must always have a corresponding credit entry and the total amount of the debit entry must always equal the total amount of the credit entry. Journal (book of original entry) - ANSWER- General Journal Ledger (book of final entry) - ANSWER- General Ledger (Standard Form and Running Balance Form) Journalizing - ANSWER- It is the systematic and chronological recording of business transactions. Journal Entry - ANSWER- It is a transaction recorded in the book of original entry or journal. SIMPLE JOURNAL ENTRY - ANSWER- one that has only one debit and one credit account. COMPOUND JOURNAL ENTRY - ANSWER- one that has more than two (2) accounts. Posting - ANSWER- It is the process of transferring the recorded transactions from the journal to the ledger. Ledger - ANSWER- It is a systematic compilation of all accounts and used as a tool to classify the recorded transactions for the purpose of getting the final balance of each account. Trial Balance - ANSWER- A list of accounts and their balances at a given time. The purpose is to prove the equality of debits and credits after posting. Limitations of a Trial Balance - ANSWER- does not prove that all transactions have been properly recorded and posted. Transposition - ANSWER- the error is committed when the figures' digit positions are interchanged. Transplacement/Slide - ANSWER- the position of the decimal point is erroneously moved either to the left or to the right. Erroneous Account Title - ANSWER- the error refers to the use of an inappropriate or wrong account title. Error of Omission - ANSWER- the error is done by not recording an economic transaction, which could either be intentional or unintentional. Adjusting Entries - ANSWER- These are journal entries prepared at the end of the accounting period to update the ledger. ACCRUAL TYPE - ANSWER- it records an expense when already incurred even if not paid yet; and revenue when already earned even if not collected yet. DEFERRAL TYPE - ANSWER- actual amount of income and expense is determined at year-end based on previously recorded advance payment or collection. ACCRUED EXPENSE - ANSWER- expense already incurred but not yet paid. ACCRUED INCOME - ANSWER- income already earned but not yet collected. PREPAID EXPENSE - ANSWER- expense already paid but not yet incurred. It is also called prepayment. UNEARNED INCOME - ANSWER- income already collected but not yet earned. It is also called pre collection. UNEARNED (Precollected) INCOME - ANSWER- Credited either to a liability account or an income account. It is a mixed account because at the end of the period, it is partly liability and partly income. DEPRECIATION - ANSWER- it is the systematic and rational allocation of the depreciable cost of a tangible fixed asset over its estimated useful life. DEPRECIATION EXPENSE - ANSWER- assigned portion of the cost of fixed asset to the period during which it is used. It has a normal balance of DEBIT.