Definitions
What is a trial balance?
List of accounts and their balance at a given time
What is the purpose of a general journal?
To chronologically list transactions and other events expressed in terms of debits and credits to accounts.
How is an adjusting entry prepared?
Companies analyze each account in the trial balance to determine whether it is complete and up-to-date for financial statement purposes
What is the first closing entry in the process?
Close Revenues
Why is converting from cash basis to accrual basis important?
To conform with GAAP
What are the names of the terms that describe where a company makes entries in the recording process?
Debit and Credit
What are the four parts of each general journal entry?
The accounts and amounts to be debited
The accounts and amounts to be credited
A date
An explanation
What are the two deferral subcategories?
Prepaid Expenses & Unearned Revenues
What is the second closing entry in the process?
Close Expenses
What versions of prepaid expense and accrued liabilities do you need to find operating expense?
Beginning and Ending
What is the transferring of journal entries to the ledger accounts called?
Posting
After completing a journal entry it is time to post to the general ledger or the T-accounts. What is the difference between the general ledger and T-accounts?
The general ledger performs the same task as the T-accounts but T-accounts track activity with less detail. General ledgers have explanations and T-accounts do not.
What do the adjusting entries ensure?
Companies are following the revenue recognition and expense recognition
What is the final step in the closing process?
Close Dividends
What 2 Accounts are necessary for determining Service revenue on an Accrual Basis?
Accounts receivable, and unearned service revenue
True or False, the Post-Closing trial balance is an optional step in the accounting cycle?
True
Prepare the general journal entry for the following transaction.
On September 7, Services are performed and the client is billed for $10,000.
Accounts Receivable 10,000
Services 10,000
What are the two Accrual subcategories?
Accrued Revenues & Accrued Expenses
What accounts are closed to Income Summary?
Revenues and Expenses
How do you calculate operating expense on an accrual basis?
Cash paid for operating expenses (+beginning prepaid expense-ending prepaid expense-beginning accrued liabilities+ending accrued liabilities)=Operating expenses(accrual)
What are the basic steps in the accounting cycle?
Identifying and measuring transactions and other events
Journalizing
Posting
Preparing an unadjusted trial balance
Making adjusting entries
Preparing an adjusted trial balance
Preparing financial statements
closing
If you purchased office supplies for $1,800 and paid $1,400 Cash while the rest remained outstanding, what should you debit and credit?
Debit office supplies and credit cash and accounts payable.
A company fails to record the entry to accrue utilities expense. On the financial statements this results in a ______ of net income and _______ of liabilities
Overstatement; understatement
What accounts are closed to Retained Earnings?
Income Summary and Dividends
What is the equation for service revenue on an Accrual Basis?
Cash Receipts from customers(-begging accounts receivable+ending accounts receivable+beginning accrued liabilities-ending accrued liabilities)=Service Revenue(Accrual)