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ADM1340 Financial Accounting Final Exam Study Set
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ADM1340 Financial Accounting FinalExam Study Set
general ledger - Answer a collection of all accounts used to record the company's
transactions
posting - Answer transferring information from a journal entry to a ledger account
general journal - Answer a book of original entry in which business transactions are
recorded in chronological order
trial balance - Answer a list of accounts and their balances at a given time;
a proof of the equality of debits and credits in a general ledger;
won't balance if an entry's debit doesn't equal its credit
when is revenue recognized? - Answer the date on which the service was performed or
product delivered
temporary accouts - Answer accounts that are closed out at end of period
1. revenue
2. expense
3. divedend
permanent accounts - Answer accounts that are NOT closed
1. all assets
2. all liabilities
3. all shareholders' equity
original and adjusting entry for prepaid expenses - Answer ori: Dr. Asset acct; Cr. Cash
adj: Dr. Expense acct; Cr. Asset acct
original and adjusting entry for unearned revenue - Answer ori: Dr. Cash; Cr. Liability
acct
adj: Dr. Liability acct; Cr. Revenue acct
original and adjusting entry for accrued expenses - Answer ori: No entry
adj: Dr. Expense acct; Cr. Liability acct
original and adjusting entry for accrued revenues - Answer ori: No entry
, adj: Dr. Asset acct; Cr. Revenue acct
which financial statements do adjusting entries affect? - Answer 1) income statement
2) statement of financial position
purpose of closing entries - Answer 1) update R/E acct by transferring profit (loss) and
dividends to R/E acct
2) prepare the temp accts for next period's posting by reducing their balances to zero
process of closing entries - Answer Step 1: close revenue accts: Dr. revenue acct for its
balance and Cr. Income Summary for total revenues.
Step 2: close expense accts: Dr. income summary for total expense accts and Cr each
expense acct for its balance
Step 3: close income summary: Dr. income summary for balance in acct (or Cr if loss)
and Cr (Dr) Retained earnings.
Step 4: close dividends: Dr. R/E and Cr. dividends for balance in acct
Accounting cycle - Answer 1. analyse business transactions
2. journalize transactions
3. post to general ledger accts
4. prepare trial balance
5. journalize and post adjusting entries
6. prepare adjusted trial balance
7. prepare financial statements
8. journalize and post closing entries
9. prepare post-closing trial balance
adjusted trial balance - Answer proves equality of total debit and total credit accts after
all adjustments;
prepared after adjusting entries have been journalized and posted
main source for preparation of financial statements;
receivables - Answer amounts that are due to a business from its customers;
are assets; credit instruments;
receivable at nrv;
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