Answer questions related to the accounting cycle.
A company may be profitable but cash poor, or generating millions of dollars in revenue but still not profitable. How the business transactions are reported in books is very important for regulators as well as investors. Accurate reporting of business transactions is essential for transparency.
This course has introduced the accounting process of analyzing, classifying, and summarizing business transactions into accounts. Now, you begin to examine things in more detail, including:
The difference between the cash basis and accrual basis of accounting.
The classes and types of adjusting entries (prepared at the end of an accounting time frame).
Use of a worksheet to summarize the work completed during the accounting period.
The preparation of an organization’s closing entries.
How to report financial data using a classified balance sheet.
This assessment focuses on the need for adjusting entries, including:
The difference between the cash and accrual bases of accounting.
The concept of adjusting entries and how they are prepared.
How to classify adjusting entries.
The concept of asset depreciation and its effect on book values.
Complete the Assessment 3 Template [DOCX].
Review all suggested readings.
Note: Accuracy in accounting is paramount so take your time and double-check your work for errors or omissions.
Answer questions correctly. When you are satisfied with your responses, save and submit your template in the courseroom.
Step 1: Compare and contrast how revenues and expenses are reported under the cash basis of accounting and the accrual basis of accounting.
Step 2: Explain why adjusting entries are necessary at the end of an accounting period.
Step 3: Identify examples of an adjusting journal entry for various types of transactions.
Step 4: Explain accumulated depreciation.
Step 5: Identify which account balances are extended to the Income Statement columns, the Statement of Retained Earnings columns, and the Balance Sheet columns.
Step 6: Determine the current ratio between assets and liabilities for a given year.
Step 7: List the accounting cycle steps in proper order.
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
Competency 1: Define accounting terminology and its application to accounting principles.
Compare and contrast how revenues and expenses are reported under the cash basis of accounting and the accrual basis of accounting.
Explain accumulated depreciation.
List the accounting cycle steps in proper order.
Competency 2: Apply accounting cycle strategies to manage business financial events.
Explain why adjusting entries are necessary at the end of an accounting period.
Identify examples of an adjusting journal entry for various types of transactions.
Identify which account balances are extended to the Income Statement columns, the Statement of Retained Earnings columns, and the Balance Sheet columns.
Determine the current ratio between assets and liabilities for a given year.
Competency 4: Convey purpose, in an appropriate tone and style, incorporating supporting evidence and adhering to organizational, professional, and scholarly writing standards.
Convey clear meaning through appropriate word choice and usage.
Remove or Replace: Header Is Not Doc Title
Assessment 3 Template
Completing the Accounting Cycle
Respond to the following seven questions using grammatically correct language. Save the document and submit it in the courseroom.
1. How are revenues and expenses reported on the income statement under the cash basis of accounting and the accrual basis of accounting?
2. Which events during an accounting period trigger the recording of normal journal entries and which event triggers the making of adjusting entries? Please explain why adjusting entries are necessary at the end of an accounting period.
3. Give an example of an adjusting journal entry for each of the following transactions.
· Equal growth of an expense and a liability.
· Earning of revenue that was previously recorded as unearned revenue.
· Equal growth of an asset and revenue.
· Increase in an expense and decrease in an asset.
4. The balance in the equipment account is $1,375,000, and the balance in the accumulated depreciation equipment account is $725,000. What is the book value of the equipment and does that amount mean that the equipment has a loss in real value of $725,000? Explain your response.
5. After the Adjusted Trial Balance columns of a work sheet have been totaled, which account balances are extended to the Income Statement columns, the Statement of Retained Earnings columns, and the Balance Sheet columns?
6. Current assets and current liabilities for a company are:
· Current assets: 2013—$262,500; 2014—$310,500.
· Current liabilities: 2013—$150,000; 2014—$172,500.
Determine the current ratio for 2013 and 2014. Does the change in the current ratio from 2013 to 2014 indicate a favorable or unfavorable trend?
7. Rearrange the following steps in the accounting cycle in proper order:
· Financial statements are prepared.
· An adjusted trial balance is prepared.
· Adjustment data are assembled and analyzed.
· Adjusting entries are journalized.
· Closing entries are journalized and posted to the ledger.
· An unadjusted trial balance is prepared.
· Transactions are posted to the ledger.
· Transactions are analyzed and recorded in the general journal.
· An optional end-of-period work sheet is prepared.
· A post-closing trial balance is prepared.
Part 1-Accounting Cycle
BUS-FPX3061 Assessment 2 Template
PART 1: Accounting Cycle
Respond to the following eight questions using grammatically correct language.
1. Describe the steps in recording and posting the effects of a business transaction and provide some examples of source documents used in these steps. 1. Record the business transaction. Source document is used as evidence of business transaction.
2.Recording of journal entry; Journalize the business transaction in general journal.
3. Post General Journal entry to ledger accounts.
Some source document used includes invoices and cash payment receipts.
2. Which steps in the accounting cycle are performed throughout the accounting cycle? 1. Examine source documents to analyze the transaction.
2. Journalize transactions in the general journal.
3. Post General journal entries to the ledger accounts.
4. Prepare a trial balance.
3. Which of the steps in the accounting cycle are performed only at the end of the accounting period? 1. Prepare post-closing entries.
2. Journalize and post entries.
3. Prepare post-closing trial balance.
4. Prepare financial statements.
4. What is the purpose of the “dividends” account and under what circumstances would this account be increased? Dividends accounts shows the portion of profits paid by the company to shareholders. Dividend account indicates profits earned by the company during accounting cycle company’s and indicates company’s financial stability.
5. What are the rules of debit and credit for accounts appearing on a firm’s balance sheet and income statement? 1. Debit decrease liabilities while credits increase liabilities
2. Debits decrease stockholders’ equity while credits increase stockholders’ equity
3. Debit increase assets while credits decrease assets
4. Debits increase dividends while credits decrease dividends
5. Debits increase expenses while credits decrease expenses
Debits decrease revenues while credits increase revenues.
6. Describe the nature and purposes of the general journal, ledger, and chart of accounts. A general journal is the original book of entry. It is the book in which all business transactions are recorded in the form of journal entries. General ledger is the collection of all accounts which have been used in making of business transaction. The general ledger sorts information from the general journal into relevant accounts for preparation of financial statements. A chart of accounts is a comprehensive list of accounts, their balances and the numbers of all accounts. General ledger information is summarized using chart of accounts. The chart of account is prepared in the order of assets, liabilities, equity, revenues and expenses. Balances of various accounts are listed under chart of accounts.
7. What are the purposes of an unadjusted trial balance? Describe the types of accounts that would appear on this type of trial balance. Unadjusted trial balance verifies totals of the debit account b
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