accounting cycle Flashcards
(17 cards)
What is a transaction?
Refers to the argument between two parties to exchange goods and services for money
If money is paid immediately, it’s a cash transaction; if paid later, it’s a credit transaction.
What is a source document?
Written proof that the transaction took place and shows the origin of the transaction
Must include date and reason for the transaction.
What are subsidiary journals?
Company’s books used to record transactions of the company for the first time
CRJ records cash receipts; CPJ records cash payments.
What does the CRJ stand for?
Cash Receipt Journal
Records all the cash receipt transactions of the business.
What does the CPJ stand for?
Cash Payment Journal
Records all the cash payment transactions of the business.
What is the purpose of journals in accounting?
Help to summarise similar transactions and reduce the number of transactions recorded in the general ledger.
What is a general ledger?
Used to record all totals of all accounts from the subsidiary journals
Serves as a summary of the subsidiary journals.
What are the two sections of the general ledger?
- Balance sheet section
- Nominal accounts section
What accounts are included in the balance sheet section of the general ledger?
Asset accounts, some owners’ equity accounts, and liabilities accounts.
What accounts are included in the nominal accounts section of the general ledger?
Sales, cost of sales, revenues, and expenses.
What is a trial balance?
List of balances and totals of all accounts in the general ledger
The total on debit and credit side should always be equal.
Where do the balances in a trial balance come from?
The balance sheet section of the general ledger.
Where do the totals in a trial balance come from?
The nominal accounts section of the general ledger.
What is an income statement?
Used to record all income and expenses from trial balance to determine the financial results of the enterprise.
What does it indicate if income is more than expenses?
Profit.
What does it indicate if income is less than expenses?
Loss.
What is a balance sheet?
A financial statement that summarizes the company’s assets, liabilities, and equity at a specific point in time.
