Manual Project ch 1

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  1. 5 Steps to recording a transaction
    • 1. exchanges or adjustments to record
    • 2. account balances  affected
    • 3. proper values for each account
    • 4.Record  in proper time period
    • 5.Record in accounting records, and summarize on financial statements
  2. 9 Steps in the accounting process
    • 1. Transaction occur
    • 2. Prepare documents
    • 3. Record in Journals
    • 4. Post to Ledgers
    • 5. Prepare Unadjusted General Ledger Trial Balance
    • 6. Prepare and Post Adjusting Entries
    • 7. Prepare Adjusted Trial Balance
    • 8. Prepare Financial Statements
    • 9. Prepare Closing Entries
  3. Transaction Occur
    3 Most common transaction cycles
    • Sales and cash receipts
    • Purchases and Cash disbursement
    • Payroll
  4. Prepare documents
    Source of documents?
    • Internal documents prepared by the company 
    • External documents prepared by an outside organization
  5. Record in Journals
    4 Characteristics of journals
    • 1.Every transaction recorded in a journal.
    • 2.Debits = Credits
    • 3. Special journals for similar, repetitive  transactions. General journal  for non-repetitive transactions 
    • 4. journals vary by company based on needs and management
  6. Post to Ledgers
    Purpose of general ledger
    Summarizes the transactions in journals by account balances
  7. What is the chart of account?
    A list of all the account titles and numbers of a company.
  8. General journals to general ledger posting
    Individual transactions posted to ledger
  9. Special journals to general ledger posting
    Transactions montly totals posted to ledger
  10. general ledger balances
    net total of all transaction since the company started except closing accounts
  11. Subsidiary ledger 2
    • 1.supports and agrees in total to general ledger.
    • 2.Contains the details and activity of the account
  12. Subsidiary ledger-examples
    • Account Receivable
    •  Account Payable
    • Employee earning 
    • Perpetual inventory
  13. Prepare Unadjusted General Ledger Trial Balance
    What it is?
    listing of general ledger balances before adjusting entries. Debits = Credits
  14. Prepare Unadjusted General Ledger Trial Balance
    When should it be prepared?
    When all transactions, except adjusting entries, are recorded and posted
  15. 8 Items typically seen on a worksheet
    • Account #
    • Account Title
    • Prior Year Post Closing Trial Balance 
    • Unadjusted Trial Balance
    • Adjustments
    • Adjusted Trial Balance
    • Income Statement
    • Balance Sheet
  16. Prepare and Post Adjusting Entries
    primary reason is to convert from cash to accrual basis.
  17. 7 requirements in recording adjusting entries
    • 1.prepare end of period before financial statements
    • 2.every entry affects the balance sheet and income statement
    • 3.Debits = Credits 
    • 4.recorded in the general ledger
    • 5. entries prepared separately
    • 6. amounts  posted individually to general ledger 
    • 7. Most not posted to subsidiary ledgers.
  18. 6 general categories of adjusting entries
    • 1.Prepaid expense
    • 2. Accrued expense
    • 3.Accrued revenue
    • 4.Unearned revenue
    • 5.Estimated items
    • 6.Inventory
  19. Prepare and Post Adjusting Entries
    Other entries
    Bank service charges  recorded in general ledger but not an adjusting entry
  20. Prepare Adjusted Trial Balance
    3 Steps to complete
    • 1.All adjusted entries posted to the worksheet.
    • 2. combine adjusting entries  with unadjusted trial balance totals.
    • 3.adjusted trial balance Debits = Credits
  21. Posting adjusting entries to the general ledger (2)
    • 1. can be done same time posted to the worksheet.
    • 2. usually after the financial statements are prepared
  22. Prepare Financial Statements
    final step on the worksheet (2)
    • 1.complete the income statement and balance sheet columns.
    • 2.use information for financial statements.
  23. 5 Differences in the worksheet totals and the financial statements.
    • 1.Statements conform to GAAP
    • 2. Account balance can combined for the statement total
    • 3. Classified statement show current and non-current assets and liabilities.
    • 4. some cash flow information not on worksheet
    • 5.Footnotes and disclosures not on  worksheet
  24. Prepare Closing Entries
    annually,on December 31, or year-end month
  25. 3 typical closing entries
    • 1.  revenue  to income summary
    • 2. expense  to income summary
    • 3.  income summary to stockholders' equity
  26. Income summary to stockholder's equity
    sole, partner, corp.
    • sole  or partner income summary  close to one or more capital accounts. 
    • corporation close to retained earnings
  27. 5 facts about closing entries
    • 1. Prepared annually at year end or cycle end
    • 2. Prepared after all transactions and adjustments are posted 
    • 3. Revenue and Expense close to start new year with zero balance
    • 4. Debits = Credits
    • 5. Each closing entry recorded in journal then posted to ledger
  28. What happens after closing
    • Left with only balance sheet balances that = 
    • adjusted trial balance except retained earnings
  29. Post closing Trial Balance
    When prepared and purpose
    • After closing entries are posted
    • Make sure  Debits = Credits  before the next year and no closing errors.
  30. Internal Controls
    Why needed?
    To safeguard assets and provide reasonable assurance of accurate data.
  31. 5 qualities of adequate documents and records
    • 1. Prenumbered consecutively.
    • 2. Prepared before, during, or after a transaction occurs
    • 3.  simple and clearly understood.
    • 4. Designed for multiple uses 
    • 5. Constructed for correct preparation.
  32. 3 points for Authorization of transactions
    • 1.Every transaction must be properly authorized.
    • 2.control over who acquires or expends assets 
    • 3.Person authorizing signs or initials  document to communicate authorization to other users
  33. Why the need for separation of the custody of assets from accounting
    to protect the company against fraud
  34. Independent checks on performance
    What is it?
    Review of transcaction and related assets for propriety and correct recording by a person not originally responsible for any aspect of the transaction
  35. Independent checks on performance
    To make sure record keeping is done accurately, completely, and honestly.
  36. Independent checks on performance
    3 important points
    • 1.not  a subordinate, relative, or close friend of  original preparer.
    • 2. independent checks  indicated on documents or records by initialing them.
    • 3.Management aware of  internal control of documents and records
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Manual Project ch 1
Chapter 1
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