Chapter 2 Flashcards
(21 cards)
What are cash transactions?
-payment that is made at the same time or immediately when a cash sale or a purchase of goods and services takes place
What are credit transactions?
-payment that is delayed or postponed during a sale or purchase of goods/services
How many stages are there in the accounting cycle?
4
What is stage 1 of the accounting cycle?
identify and record source documents in a journal, then post them to ledgers
What is stage 2 of the accounting cycle?
make adjusting entries in the journal and post them to ledgers
What is stage 3 of the accounting cycle?
prepare rports on the financial performance or position
What is stage 4 of the accounting cycle?
accounts are closed at the end of the financial period (income, expenses, icome drawings, drawings and dividends)
what is the accounting information system?
a system that business use to collect, store and process accounting data.
Most businesses have computerized their accounting information system to generate financial reports for stakeholders to use in their decision-making.
Show the accounting process.
source document > Journal > Ledgers > Trial balance > Financial statements on financial performance and position.
Name me the accounting theories applied
Objectivity theory
Historical cost theory
Monetary theory
Elaborate on the objectivity theory.
A source document provides reliable and verifiable evidence that a transaction took place
Elaborate on the historical theory.
The original cost of the transaction is captured in the source documents
Elaborate on the monetary theory.
The source documents capture the whole value of the transaction in monetary terms
Name me all the source documents.
Invoice Credit note Debit note Receipt Payment voucher Remittance advice bank statement
What is the function of an invoice?
Informs credit customer of the amount owed after business sold goods or provided services on credit
What is the function of a credit note
reduces the amount owed by the credit customers because they were previously overcharged or after goods were returned
What is the function of a debit note
increases the amount owed by the credit customers who were previously overcharged
What is the function of a receipt
acknowledges payment received from customers
What is the function of a payment voucher
- processes payment to credit suppliers
- Must be approved by authorized personal
- must be supported by original supplier’s invoice
What is the function of a remittance advice
-informs credit supplier that a cheque has been made for a specific invoice
What is the function of a bank statement
-evidence of deposits and withdrawals made by the business
