Grade 11 Modules 2021-2022 ABM

FABM 1 (Part 2)

Exercise 6-5: from book

1. d
2. i
3. j
4. h
5. c
6. e
7. b
8. f
9. g
10. a

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Discussion questions from chapter 8 of the fabm 1 book.

1. What is an accounting cycle?
> A series of recurring accounting steps or processes that span from the start to the end of a particular accounting period.

2. What are the steps in the accounting cycle?
1.) Analyzing business transactions from source documents
2.) Journalizing the business transactions
3.) Posting journal entries to the ledger
4.) Preparing trial balance
5.) Journalizing and posting adjusting journal entries
6.) Preparing adjusted trial balance
7.) Preparing financial statements
8.) Journalizing and posting closing journal entries
9.) Preparing post-closing trial balance
10.) Journalizing and posting reversing journal entries

3. What is the importance of the chart of accounts?
> Chart of cccounts is the list of accounts a company has and it is also available for recording transactions of a business. It is important since it segregate all the
accounts of its specified area. It's important because chart of accounts designed as a way to separate expenditure, revenues, assents, and liabilities, so a business can have as clear understanding and view of there overall financial statements.

4. What is transaction analysis?
> Transaction analysis entails a thorough understanding of the business transaction itself and its implication on assets, liabilities, and owner's equity. Transaction analysis is the act of examining a transaction to decide how it affects the accounting equation. It's also the first step in the accounting cycle. In order to properly analyze a transaction, you must know and understand a few key things.

5. In terms of normal business, differentiate assests (including contra-assest) liabilities, owner's equity, revenue, and expense accounts.
> Asset is something a business has or owns while contra-asset is a negative asset account that offsets the asset account with which it is paired. Its purpose is to store a reserve that reduces the balance in the paired account; Liabilities is something we owe to a non-owner; Owner's equity is something we owe to the owners or the value of the investment to the owner; Revenue is value of the goods we have sold or the services we have performed; Expenses was costs of doing business.

6. What are source documents? Provide three examples?
> The source document is a good internal control and provides evidence a transaction occurred. Providing source documents to your bookkeeper or accountant in a timely manner assists them in preparation of financial statements and accurately analyzing your business activity. The examples are official receipts, sales invoices, and statements of account or billing statements.

7. What is Journalizing?
> Journalizing is the process of entering a business transaction in the form of an accounting entry in the "journal" or the so-called "book of original entry".

8. Why is the journal called the "book of original entry"?
> Because a journal is where business transactions are initially recorded in chronological order.

9. What is a journal entry? What are its components?
> A journal entry can take the form of a simple journal entry or a compound journal entry.

The components of journal entry are:

1.) Date of transaction
2.) Particulars (account titles and explanation)
3.) Reference (for posting reference)
4.) Debit account title/s and debit amount/s
5.) Credit account title/s & credit amount/s
6.) An explanation

10. Differentiate simple journal entry from compound journal entry.
> A simple journal entry has one debit account and one credit account. On the other hand, a compound journal entry has more than one debit account or more than one credit account, or both.