The Accounting Cycle
What is the first step in the accounting cycle?
Analyzing business transactions.
What is the process of recording a business transaction in the accounting records called?
Journaling
After journalizing, where are transactions posted?
General Ledger
What is the formula for Net Income?
Revenues - Expenses
What is the purpose of adjusting entries?
A. Update accounts
B. reconcile bank accounts
C. correct errors for accounts
D. allocate resources for accounts
A. Update accounts
How many steps are there in the accounting cycle?
5 Steps
What is the journal entry for purchasing equipment for $1,500? (What are the accounts and what's debit/credit)
Debit Equipment, Credit Cash.
What is the purpose of preparing a trial balance?
To ensure total debits equal total credits.
What does the Balance Sheet report?
A company's financial position at a specific point in time, including assets, liabilities, and equity.
What is the adjusting entry for a purchase of $1200 on equipment for the year, but adjusting for only 4 months worth of payments? (Accounts/Debits)
Debit $400 - Equipment; Credit $400 - Accounts Payable.
What is the second step of the accounting cycle?
Journalizing the transactions.
What is the journal entry for recording $2,000 in service revenue? (What's being debited and credited)
Debit Cash, Credit Service Revenue.
What is the correct balance for Cash if debits are $1,200 and credits are $500?
$700
If revenues are $10,000 and expenses are $6,500, what is the net income?
$3,500
What adjusting entry would you make for rent prepaid for 12 months, if 3 months have passed? (Accounts only)
Debit Rent Expense; Credit Prepaid Rent (Accounts Payable)
What is the last step of the accounting cycle?
Writing Financial Statements
What is the journal entry for paying rent of $500?
Debit Rent Expense. Credit Cash.
True or False: A trial balance shows whether accounts are balanced before adjusting entries.
True
What is the purpose of a worksheet in accounting?
To summarize financial data for analysis
Which of the following is a temporary account? Accounts Receivable, Capital Stock, Retained Earnings, Salary Expense
Salary Expense
Name all the steps of the accounting cycle in order.
Analyzing transactions, journalizing, posting to the general ledger, preparing a trial balance, making adjusting entries, preparing financial statements
If a business purchased $500 of office supplies on account, what is the journal entry?
Debit Office Supplies. Credit Accounts Payable.
Prepare a simple trial balance using the following data:
Cash: $1,200, Accounts Payable: $500, Service Revenue: $1,500, Rent Expense: $500, Equipment: $2,000.
Debits: $3,700, Credits: $2,000.
Prepare a simple balance sheet with assets of $8,000, liabilities of $3,000, and equity.
Equity = $5,000
Which of the following accounts is closed at the end of an accounting period? Revenue, Equipment, Expenses, Salary
Revenue