4.1.4 [Systems of Bookkeeping]

Question 1

BOOKKEEPING

Answer 1

1. systematic record of financial transactions

Question 2

SYSTEMS OF BOOKKEEPING

Answer 2

1. informal
2. formal

Question 3

INFORMAL BOOKKEEPING SYSTEM

Answer 3

1. writing of transactions on walls and doors
2. convenient but not reliable

Question 4

CASH

Answer 4

1. medium of exchange

Question 5

NOTES RECEIVABLE

Answer 5

1. written promissory note from debtor
2. readily converted into cash

Question 6

ACCOUNTS RECEIVABLE

Answer 6

1. claim that arises from a sale of merchandise
2. not evidenced by formal promise to pay

Question 7

MERCHANDISE INVENTORY

Answer 7

1. goods purchased or produced intended for sale

Question 8

PREPAID EXPENSES

Answer 8

1. anything paid in advance

Question 9

MARKETABLE SECURITIES

Answer 9

1. “short-term investments”

Question 10

NOTES PAYABLE

Answer 10

1. “short-term debts”

Question 11

ACCOUNTS PAYABLE

Answer 11

1. financial obligation from purchase of merchandise

Question 12

ACCRUED LIABILITIES

Answer 12

1. expenses incurred but not yet due/paid

Question 13

UNEARNED INCOME

Answer 13

1. collections received in advance for goods or services that will be given in future periods

Question 14

MORTGAGE PAYABLE

Answer 14

1. debt owed by a business
2. with secured claim through mortgage on an asset

Question 15

BONDS PAYABLE

Answer 15

1. long term obligation of corporations
2. evidenced by formal certificates (bonds)

Question 16

CASH INCOME

Answer 16

1. cash payment for service rendered or product sold

Question 17

NON-CASH INCOME

Answer 17

1. form of income without receive of cash

Question 18

CASH EXPENSE

Answer 18

1. “out-of-pocket” costs

Question 19

NON-CASH EXPENSE

Answer 19

1. inputs used in business with no direct cash outlay

Question 20

SINGLE ENTRY BOOKKEEPING (FORMAL SYSTEM)

Answer 20

1. one account for transaction
2. parallel columns for various expense and income items
3. receipts are grouped and separated from expenses

Question 21

DOUBLE ENTRY BOOKKEEPING
(FORMAL SYSTEMS)

Answer 21

1. for each transaction, there is both source and destination
2. each transaction is recorded twice

Question 22

ACCOUNTING PROCEDURES
(DOUBLE ENTRY BOOKKEEPING)

Answer 22

1. cash accounting
2. accrual accounting

Question 23

KEY OUTPUTS FROM ACCOUNTING SYSTEM

Answer 23

1. transactional journal
2. general ledger
3. balance sheet
4. income statement
5. statement of cash flows

Question 24

TRANSACTIONAL JOURNAL

Answer 24

1. record of all financial transactions
2. in terms of debit and credit

Question 25

GENERAL LEDGER

Answer 25

1. summary of entries in transactional journal
2. balance in revenue and expense (income statement)
3. balance in assets, liabilities, and proprietorship (balance sheet)