Accounting 1 Semester 1 Exam Review 2021 with correct solution

What is the Accounting Cycle? (In order) Answer- 1. Source documents are checked for accuracy, and transactions are analyzed into debit and credit parts. 2. Transaction, from information on source documents, are recorded in a journal. 3. Journal entries are posted to the general ledger. 4. A work sheet, including a trial balance, is prepared from the general ledger. 5. Financial statements are prepared from the work sheet. 6. Adjusting and closing entries are naturalized from the work sheet. 7. Adjusting and closing entries are posted to the general ledger. 8. A post-closing trial balance of the general ledger is prepared. Steps of Posting Answer- 1. Write date in the date column of the ledger. 2. Journal page number in the Post Ref.. 3. Write the debit or credit amount. 4. Write the account balance (debit or credit). 5. Return to journal and post ref the account number. Accounting Period Cycle Answer- Changes in financial information are reported for a specific period of time in the form of financial statements. Adequate Disclosure Answer- Financial statements contain all information necessary to understand a business's financial condition. Business Entity Answer- Financial information is recorded and reported separately from the owner's personal financial information. Consistent Reporting Answer- The same accounting procedure are followed in the same way n each accounting period. Going Concern Answer- Financial statements are prepared with the expectation that a business will remain in operation indefinitely. Historical Cost Answer- The actual amount paid for merchandise or other items bought is recorded. Matching Expenses with Revenue Answer- revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period. Objective Evidence Answer- A source document is prepared for each transaction. Realization of Revenue Answer- revenue is recorded at the time good or services are sold. Unit of Measurement Answer- Business transactions are stated in numbers that have common values--that is, using a common unit of measurement. Account Title Answer- The name given to an account Asset Answer- Anything of value that is owned Liability Answer- an amount owned by a business Accounting Equation Answer- Assets= Liabilities + Owners Equity Expense Answer- a decrease in owner's equity resulting from the operation of a business Owner's Equity Answer- the amount remaining after the value of all liabilities is subtracted from the value of all assets Capital Answer- the account used to summarize the owner's equity in a business Revenue (Sales) Answer- an increase in owner's equity resulting from the operation of a business Service Business Answer- a business that performs an activity for a fee Proprietorship Answer- a business owned by one person T Account Answer- an accounting device used to analyze transaction Chart of Accounts Answer- a list of accounts used by a business Memo (1) Answer- a form on which a brief message is written describing a transacion Proving Cash Answer- determining that the amount of cash agrees with the accounting records Invoice (2) Answer- a form describing the goods or services sold, the quantity, and the price Receipt (3) Answer- a business form giving written acknowledgment for cash received Sales Invoice Answer- an invoice used as a source document for recording a sale on account Check(4) Answer- a business form ordering a bank to pay cash from a bank account Source Documents (5 of them) Answer- a business paper from which information is obtained for a journal entry Tape Answer- Sales for the day Posting Answer- transferring information from a journal entry to a ledger account 3 Types of endorsements and what is written on each Answer- 1. Blank- Just the name 2. Restrictive- Name, pay to the order of, Your Name 3. Special- For Deposit only (Business) Postdated Check Answer- dated in the future Electronic Funds Transfer (EFT) Answer- a computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents Dishonored Check Answer- bad check, not enough money Petty Cash Answer- small payments daily by workers Income Statement Answer- a financial statement showing the revenue and total expenses for a fiscal period Balance Sheet Answer- a financial statement that reports assets, liabilities, and owner's equity Net Income Answer- Sales are greater than expenses Net Loss Answer- the difference between total revenue and total expenses when total expenses are greater Fiscal Period Answer- Usually one year long-- the length of time for which a business summarizes and reports financial information Adjustments Answer- supplies expense/ insurance expense--changes recorded on a worksheet to update general ledger accounts at the end of a fiscal period