25 Mar Answer questions related to the accounting cycle. Introduction A company may be profitable but cash poor, or generating million
- Answer questions related to the accounting cycle.
Introduction
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.
- Overview
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.
- Preparation
- 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.
Instructions
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.
Competencies Measured
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
BUS-FPX3061
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?
[Answer here]
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.
[Answer here]
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.
[Answer here]
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.
[Answer here]
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?
[Answer here]
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?
[Answer here]
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.
[Answer here]
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