accounting chapter 3
What are the five essential elements of a posting to a ledger account? The five essential elements of a posting to a ledger account are as follows:
1. The date indicated generally is the date as of which the posting is being made. 2. The next column may be used for memorandum entries or notations of supplemental information of value to the accountant. 3. The Ref. Column is the posting reference. That means it contains the name of the journal and the page number of the journal from which the posting is made. 4. The next two columns show the dollar amounts of debits and credits posted from the various journal entries affecting the account. 5. The two columns on the far right are used to maintain a running balance of the account.
What are the five essential elements of a journal entry?
1. The date of the transaction 2. The titles of the accounts affected by the transaction—that is, the particular accounts to be debited and credited 3. A brief explanation of the nature and salient facts of each transaction 4. The account numbers of the accounts being debited and credited 5. The dollar amounts of the debits and credits
. How does a chart of accounts differ from a trial balance?
A chart of accounts is just a listing of account titles with account numbers for classification; a trial balance is a list of the accounts in a ledger, with their balances, at a given date.
In what sequence are accounts listed in the ledger? In a trial balance?
Accounts are listed in the ledger according to account classification. Accounts are listed in a trial balance in the same sequence in which they appear in the ledger and in the chart of accounts.
. "The ledger contains a separate account for each account in the hospital's chart of accounts. That is, if the chart of accounts contains 150 accounts, there will be 150 accounts in the ledger."
Agree. A general ledger includes an account for every account in the hospital, regardless of whether or not the account has a balance or has had any activity.
. "If a trial balance indicates an equality of debit and credit balances, this indicates that the journal and ledger are free of errors." Do you agree or disagree? Explain your answer.
Disagree. The same error could have been made in both the credit and debit columns or an entry could have been made to the wrong account.
Why is documentary evidence essential to the accounting process?
Documentary evidence is essential, because the reliability and accuracy of the information produced by the accounting process rests largely on the extent to which that information is based on verifiable, objectively determined facts.
In recording cash disbursement transactions in the journal, credits are made to cash. What types of accounts generally would be debited?
In recording cash disbursement transactions, debits are made to the accounts that the money was spent for. For example, assets, liabilities, or expenses.
In recording cash receipt transactions in the journal, debits are made to cash. What types of accounts generally would be credited?
In recording cash receipt transactions, credits are made to accounts that are the source of the cash receipt. For example, accounts receivable, liabilities, or revenues.
Why are numerical codes assigned to the accounts in a chart of accounts? Are these codes identical in all hospitals?
Numerical coding of the accounts saves clerical time and effort in that it is easier to pronounce, write, or type "601," for example, than it is to pronounce, write, or type "salaries and wages expense." The numerical coding also promotes accuracy and permits the accountant to identify the nature of any account readily. Data processing equipment requires the use of account numbers. These codes are not identical in all hospitals.
Distinguish between a chart of accounts and a ledger. ?
The chart of accounts and the general ledger contain the same accounts. The difference between the two is the fact that ledger accounts reflect monetary balances, while the chart of accounts does not.
Distinguish between general and subsidiary ledgers. Give two examples of a subsidiary ledger.
The general ledger contains a separate account for each account listed in the chart of accounts. The subsidiary ledgers are a group of accounts that are contained in a separate ledger and that support a single account in the general ledger. Examples include the accounts receivable subsidiary ledger and the accounts payable ledger.
What is the purpose of a chart of accounts? What factors influence the design of a hospital's chart of accounts?
The purpose of a chart of accounts is to depict the manner in which transaction data will be classified and recorded in the accounting records. The chart of accounts is designed primarily to meet the informational needs of the hospital management, but accounting standards as well as legal, tax, and regulatory agency requirements also influence the design of the chart of accounts.
What is the purpose of a trial balance?
The purpose of a trial balance is to ascertain whether the ledger is in balance.
What is the purpose of posting journal entries to ledger accounts?
The purpose of posting journal entries to ledger accounts is to summarize journalized information according to account classification so that all recorded increases and decreases in each account are brought together to permit the determination of individual account balances at the end of the year.
Define each of the following terms: (1) journal, (2) journalizing, and (3) journal entry.
a) A journal is a book of original entry in which transactions are recorded in chronological sequence. b) Journalizing is the process of recording transactions in the journal. c) A journal entry consists of a formal handwritten or typewritten analysis of the increase and decrease effects of a transaction on the specific account classification provided in the chart of accounts.
