accounting 3.1-3.4 adaptive questions

double entry system

A system that records the two-sided effect of each transaction in appropriate accounts. (debits and credits)

Step 4.

Trial Balance - checks to make sure debits = credits.

Step 6.

Adjusted trial balance - Shows the balance of ALL accounts

Step 5.

Adjusting entries - to convert cash transactions into the accrual accounting method

step 1.

Analyze - Accounting systems only record economic events (monetary unit assumption)

What is the purpose of the 'explanation' of each transaction that appears in a journal entry?

It provides insight into the purpose of the activity recorded.

Step 2.

Journalize the transactions (Journaling) - Chronological record of accounting transactions. Provides a quick way to find errors.

Step 3.

Post to ledger accounts - Keeps track of how much is in each account

Step 8.

Post-Closing entries - after completing financial statements for the period

Step 7.

Prepare financial statements - Take information directly from adjusted trial balance

Which of the following statements is true about source documents?

Source documents can provide evidence that a transaction has occurred. Source documents provide evidence that a transaction has occurred and are analyzed to determine the effect of the transaction on specific accounts. Ex: sales slips, a check, a bill, or a cash register report.

Stockholders' equity and liabilities both have normal credit balances. Why are the stockholders' equity debit/credit rules more complex than liabilities?

The elements of Stockholders' Equity are broken into different types of accounts; some are increased with debits and some with credits

What effect may result if specific account titles are not used in journalizing?

The general ledger will not balance.

Which of the following activities is most important for determining the nature of a transaction's effects on specific accounts?

analyzing source documents

The normal balances in stockholders' equity accounts are

credits for Common Stock, Retained Earnings, and revenues, but debits for the others.

Although possible, few businesses

enter transactions directly into the accounts.

Step 9.

prepare a post closing trial balance - closes the books to start next period with a "clean slate"

Which of the following is used to initially record transactions in the recording process?

the journal