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Unit 1.0 Fundamentals of Accounting and Bookkeeping Exam With Complete Solutions
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Unit 1.0 Fundamentals of Accounting and Bookkeeping Exam With Complete Solutions
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Unit 1.0 Fundamentals of Accountingand Bookkeeping Exam With Complete
Solutions
Proprietorship / Sole Prop - -A business owned by one person. Simplest
structure and not separate from its owner for legal purposes
-Partnership - -Business owned by two or more persons, the owners are
called partners. Not a separate legal entity. Profit/Loss "Pass through" to
owners.
-Corporation - -Business organized as a separate legal entity
-Limited Liability Company "LLC" - -Separate Business and legal entity, but
choice of how it is taxed. LLCs are fairly new structures.
-10 Steps of Accounting Cycle - -1) Business transaction occur and source
documents are created
2) Analyze business transactions
3) record/Journalize the business transactions in the journals
4) Post the journals to general ledger accounts
5) Prepare a trial balance
6) Analyze the accounts, journalize and post adjusting entries
7) Prepare an adjusted trial balance
8) Prepare Financial Statemements
9) Journalize and post closing entries
10) Prepare a post-closing trial balance
-Accounting Transaction - -Business event that has a monetary impact, such
as selling goods to a customer or buying supplies from a vendor.
-Cash Account (definition) - -Current balance of cash held by a business,
usually in checking or savings accounts. ASSET / Debit balance
-Accounts Receivable (definition) - -Sales on credit, which customers must
pay for at a later date. ASSET / Debit balance
-Inventory (definition) - -This is items held in stock, for eventual sale to
customers. ASSET / Debit balance
-Fixed Assets (definition) - -More expensive assets that the business plans
to use for multiple years. ASSET / Debit balance
, -Accounts Payable (definition) - -Liabilities payable to suppliers that have
not yet been paid. LIABILITY / Credit balance
-Debt (definition) - -Cash loaned to the business by another party
-Equity (definition) - -Ownership interest in the business, which is the
founding capital and any subsequent profits that have bee retained in the
business. EQUITY / Credit balance
-Revenue (definition) - -Sales made to customers (both on credit and in
cash). REVENUE / Credit balance
-Cost of Goods Sold (definition) - -Cost of goods or services sold to
customers. EXPENSE / Debit balance
-Administrative Expenses (definition) - -These are a variety of expenses
required to run a business, such as salaries, rent, utilities, and office
supplies. EXPENSE . Debit balance
-Income taxes (definition) - -Taxes paid to the government on any income
earned by the business. LIABILITY (if accrued) / Credit balance or EXPENSE /
Debit balance
-Software Module Entries - -Forms in accounting software which populate
accounts for you, such as creating and invoice or recording a customer
invoice
-Journal Entries - -Customized way to record accounting information
-General Ledger - -Master set of all accounts. Stores all transactions that
have been entered via modules or journal entries. May have sub ledgers for
high-volume transactions such as sales or purchases.
-Balance Sheet - -Report which lists Assets, liabilities, and equity as of the
report date
-Income Statement - -Report which lists revenues, expenses, and profit or
loss for a specific period of time
-Statement of Cash Flows - -Report which lists the cash inflows and outflows
generated by the business for a specific period of time
-GAAP - -Generally Accepted Accounting Principles. An accounting
framework for how to record transactions. Most common framework used in
the United States
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