Bookkeeping Basics - Accounting Cycle
(Part 1) Assessment Questions with
Verified Solutions
What is the difference between a debit and a credit in the journal?
✔✔ A debit increases asset or expense accounts and decreases liability or revenue accounts,
while a credit decreases asset or expense accounts and increases liability or revenue accounts.
How is the balance sheet affected by the closing process?
✔✔ The balance sheet is affected by the closing process as it updates the retained earnings
account with the net income or loss from the income statement, reflecting the final financial
position.
What is the purpose of an income statement in the accounting cycle?
✔✔ The purpose of an income statement is to summarize revenues and expenses over a specific
period to determine the net income or loss for that period.
What is meant by "posting errors," and how are they corrected?
✔✔ Posting errors occur when transactions are recorded incorrectly in the ledger. They are
corrected by making adjusting entries or re-posting the correct amounts.
1
, What is the purpose of a balance sheet trial balance?
✔✔ The purpose of a balance sheet trial balance is to ensure that the debits and credits in the
balance sheet accounts are equal before finalizing financial statements.
How does the accounting cycle begin and end?
✔✔ The accounting cycle begins with the recording of transactions and ends with the
preparation of financial statements and the closing of temporary accounts.
What is the role of depreciation in the accounting cycle?
✔✔ Depreciation accounts for the reduction in value of fixed assets over time, ensuring that
expenses are matched with the revenue they help to generate.
What does it mean to "post adjustments" in the ledger?
✔✔ Posting adjustments involves updating account balances to reflect accruals and deferrals,
ensuring that financial statements are accurate.
What are accruals and deferrals, and why are they important?
2
(Part 1) Assessment Questions with
Verified Solutions
What is the difference between a debit and a credit in the journal?
✔✔ A debit increases asset or expense accounts and decreases liability or revenue accounts,
while a credit decreases asset or expense accounts and increases liability or revenue accounts.
How is the balance sheet affected by the closing process?
✔✔ The balance sheet is affected by the closing process as it updates the retained earnings
account with the net income or loss from the income statement, reflecting the final financial
position.
What is the purpose of an income statement in the accounting cycle?
✔✔ The purpose of an income statement is to summarize revenues and expenses over a specific
period to determine the net income or loss for that period.
What is meant by "posting errors," and how are they corrected?
✔✔ Posting errors occur when transactions are recorded incorrectly in the ledger. They are
corrected by making adjusting entries or re-posting the correct amounts.
1
, What is the purpose of a balance sheet trial balance?
✔✔ The purpose of a balance sheet trial balance is to ensure that the debits and credits in the
balance sheet accounts are equal before finalizing financial statements.
How does the accounting cycle begin and end?
✔✔ The accounting cycle begins with the recording of transactions and ends with the
preparation of financial statements and the closing of temporary accounts.
What is the role of depreciation in the accounting cycle?
✔✔ Depreciation accounts for the reduction in value of fixed assets over time, ensuring that
expenses are matched with the revenue they help to generate.
What does it mean to "post adjustments" in the ledger?
✔✔ Posting adjustments involves updating account balances to reflect accruals and deferrals,
ensuring that financial statements are accurate.
What are accruals and deferrals, and why are they important?
2
