Bookkeeping Ethics and GAAP
You are the bookkeeper for a t-shirt shop. The shop closed unexpectedly, and your friends have asked you why. What is the most appropriate response?
What is to explain to your friends that your profession requires you to keep client information confidential.
The accrual basis of accounting records transactions when?
What is when they occur, regardless of when money exchanges hands.
What are Assets
When a purchase is made on account, two accounts are affected. What are they, and which receives the debit and which the credit?
What are the accounts receivable account (Debit) and the Sales account (Credit)
There are four major statements covered on the exam. Name them.
The cash basis of accounting records transactions when?
What is, when money exchanges hands, regardless of when the activity occured.
The accounting equation can be stated in a few ways, name one of them.
Or
What is Assets - Liabilities = Equity
Which accounts are closed and zeroed out in preparation for the next cycle?
This statement shows the revenues, gains, expenses and losses of a business during a specific period of time.
What is the income statement
Under this Generally Accepted Accounting Principle, it is assumed the business will continue in operation for the foreseeable future with no intention to liquidate or scale down its operations
What is the Going Concern basis or principle.
The XYZ Company took out a loan from a bank on Dec. 1st. The first interest payment is to be made on June 30, but the company is preparing its financial statements for the year ending Dec. 31st. What type of Adjusting Journal Entry should be recorded?
What is an accrued expense.
The acronym DEALER is often used to help remember what?
Which side of a t-account an account carries its balance. DEA stands for Drawing(or Dividends), Expenses, and Assets, which all increase on the LEFT or Debit side. LER stands for Liabilities, Equity, and Revenue (Sales) which increase on the RIGHT or Credit side.
Name all 8 steps of the accounting cycle in order
What are: Analyzing Transactions, Journal Entries, Posting to the Ledger, Trial Balance, Worksheet, Adjusting Entries, Financial Statements, and Closing
What is a comparative income statement.
If a bookkeeper may disclose information to the following parties
What are their employer, any party specifically given permission to disclose information to from their employer, and a judge, but only in response to a subpoena.
What are the two main types of Adjusting Journal entries?
What are accruals and deferrals? (When payment is made before or after the actual activity that caused the balance)
On a t-account, the left side represents what type of transaction?
When should adjusting entries be made?
What is step 6, or before financial statements are generated, but after an unadjusted trial balance has been made on the worksheet.
What are, Operating activities, Investing activities, and Financing activities.
This GAAP basis states that assets must be recorded at the cost they were purchased, and only adjusted if the physical inventory of an asset has changed, not if the value has risen or dropped due to fluctuations in perceived value (i.e. market value). Because of this basis, the Accumulated Depreciation account exists.
What is the Historical Cost principle or basis.
If a company receives a $2,000 deposit on a job they have not yet completed, what type of adjusting entry would be necessary?
What is a deferred revenue entry.
In most accounting software, a bookkeeper enters the transactions and categorizes the transactions into the right accounts. The software then does these two things.
What are, records the debits and credits into the correct accounts, and generates financial statements automatically.
Which step of the accounting cycle requires the accountant to update the balance of each individual account based on that period's transactions?
What is the third step, or posting to the general ledger.
A statement of equity is different depending on the type of business it is prepared for. What are the major differences between a statement of equity for a sole proprietorship and a traded company?