11 Lecture - Exercises: Recording of Transactions (Continued)

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11 Lecture

MGT101

Midterm & Final Term Short Notes

Exercises: Recording of Transactions (Continued)

In the continuation of exercises on recording transactions, more complex transactions are covered, such as adjusting entries, closing entries, and reversing entries. These entries are used to ensure that the financial statements accurately refle


Important Mcq's
Midterm & Finalterm Prepration
Past papers included

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  1. Which of the following is not a type of adjusting entry? a) Accruals b) Prepayments c) Depreciation d) Closing entries Answer: d) Closing entries

  2. Which journal is used to record credit sales? a) General journal b) Sales journal c) Cash receipts journal d) Purchases journal Answer: b) Sales journal

  3. Which of the following accounts would be debited in an adjusting entry for depreciation? a) Accumulated depreciation b) Depreciation expense c) Equipment d) Retained earnings Answer: b) Depreciation expense

  4. Which financial statement shows a company's financial position at a specific point in time? a) Income statement b) Statement of cash flows c) Balance sheet d) None of the above Answer: c) Balance sheet

  5. What type of entry is made at the end of an accounting period to update account balances? a) Adjusting entry b) Closing entry c) Reversing entry d) General entry Answer: a) Adjusting entry

  6. Which of the following is not a specialized journal? a) Sales journal b) Purchases journal c) General journal d) Cash receipts journal Answer: c) General journal

  7. Which account is credited in an adjusting entry for accrued expenses? a) Accrued expenses payable b) Expenses c) Prepaid expenses d) None of the above Answer: b) Expenses

  8. Which of the following statements is true about the trial balance? a) It shows a company's revenues and expenses. b) It shows a company's financial position at a specific point in time. c) It ensures that the accounting system remains in balance. d) It is used to make adjusting entries. Answer: c) It ensures that the accounting system remains in balance.

  9. What is the purpose of closing entries? a) To update account balances b) To ensure that the accounting system remains in balance c) To transfer net income or loss to the retained earnings account d) To reverse adjusting entries Answer: c) To transfer net income or loss to the retained earnings account

  10. Which financial statement shows a company's revenues and expenses over a specific period of time? a) Income statement b) Balance sheet c) Statement of cash flows d) None of the above Answer: a) Income statement



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What is the purpose of adjusting entries in accounting? Answer: Adjusting entries are made to update account balances and ensure that the financial statements accurately reflect the company's financial position and performance.

  2. What is a reversing entry and when is it used? Answer: A reversing entry is an optional entry made at the beginning of a new accounting period to reverse the effects of a previous adjusting entry.

  3. What is the purpose of closing entries in accounting? Answer: Closing entries are made to transfer net income or loss to the retained earnings account and close temporary accounts in preparation for the next accounting period.

  4. What is the difference between a general journal and a specialized journal? Answer: A general journal is used to record transactions that do not fit into a specialized journal, while specialized journals are used to simplify the recording process for certain types of transactions.

  5. What is the purpose of a trial balance? Answer: The purpose of a trial balance is to ensure that the accounting system remains in balance and to identify any errors in the recording process.

  6. What is the purpose of the sales journal? Answer: The sales journal is used to record credit sales.

  7. What is the purpose of the purchases journal? Answer: The purchases journal is used to record credit purchases.

  8. What is the difference between accrued expenses and prepaid expenses? Answer: Accrued expenses are expenses that have been incurred but not yet paid, while prepaid expenses are expenses that have been paid in advance.

  9. What is the difference between depreciation expense and accumulated depreciation? Answer: Depreciation expense is the amount of a long-term asset's cost that is expensed during a specific period, while accumulated depreciation is the total amount of depreciation that has been recorded for a long-term asset over its useful life.

  10. What is the purpose of the post-closing trial balance? Answer: The purpose of the post-closing trial balance is to ensure that the accounting system remains in balance after all closing entries have been made.

In accounting, the process of recording transactions is crucial for preparing financial statements. This process involves analyzing and interpreting business activities and their corresponding monetary values. Recording transactions in a systematic manner helps to ensure that financial statements are accurate and reliable. One common practice in recording transactions is to use specialized journals. Specialized journals are used to record transactions of similar types, such as sales, purchases, and cash receipts. This simplifies the recording process and saves time. In addition, it makes it easier to track transactions and prepare financial statements. Adjusting entries are also important in accounting. They are used to ensure that the financial statements reflect the correct financial position of the company. Adjusting entries are typically made at the end of an accounting period and can include recording accrued expenses or revenue, prepaid expenses, and depreciation. Closing entries are also important in accounting. They are made at the end of an accounting period to transfer the net income or loss to the retained earnings account and to close temporary accounts. This prepares the accounting system for the next accounting period. The trial balance is another key component of recording transactions. It is a listing of all accounts in the accounting system and their corresponding balances. The trial balance is used to ensure that the accounting system remains in balance and to identify any errors in the recording process. In summary, recording transactions is an essential aspect of accounting. By using specialized journals, making adjusting entries, closing entries, and preparing a trial balance, companies can ensure that their financial statements are accurate and reliable.

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