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Accounting /POA Sec 3 Chap 2: Accounting Information System

POA Sec 3 Chap 2: Accounting Information System

Accounting33 CardsCreated 2 months ago

This deck covers key concepts from the Accounting Information System chapter, including business transactions, source documents, journals, ledgers, and the accounting cycle.

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What is a business transaction?

It is an activity carried out by the business to provide goods and services in exchange for money.
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Key Terms

Term
Definition
What is a business transaction?
It is an activity carried out by the business to provide goods and services in exchange for money.
Name some examples of business transactions?
Purchase of candies from suppliers, Sales of candies to customers, Purchase of display shelves, Payments to suppliers, Receipts from customers, Paymen...
What is a source document?
It captures information about a business transaction. Information noted down are the date, a description of the transaction, the value and the parties...
Why are source documents important?
It is proof that the transaction took place. It ensures that the transactions will be accurately recorded. Both parties will have copies and hence the...
What are examples of source documents?
Invoice; Credit note; Debit note; Receipt; Cash register slip; Remittance advice; Payment voucher receipt; Bank statement.
What is the purpose of an invoice?
When the seller sells goods and services to the buyer on credit, the seller will issue an invoice to the buyer.
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POA Sec 3 Chap 2: Accounting Information System
TermDefinition
What is a business transaction?
It is an activity carried out by the business to provide goods and services in exchange for money.
Name some examples of business transactions?
Purchase of candies from suppliers, Sales of candies to customers, Purchase of display shelves, Payments to suppliers, Receipts from customers, Payment of salaries to employees, Payments for rental and utilities.
What is a source document?
It captures information about a business transaction. Information noted down are the date, a description of the transaction, the value and the parties involved.
Why are source documents important?
It is proof that the transaction took place. It ensures that the transactions will be accurately recorded. Both parties will have copies and hence they are clear about the transactions.
What are examples of source documents?
Invoice; Credit note; Debit note; Receipt; Cash register slip; Remittance advice; Payment voucher receipt; Bank statement.
What is the purpose of an invoice?
When the seller sells goods and services to the buyer on credit, the seller will issue an invoice to the buyer.
What is the purpose of a credit note?
If the buyer returns goods after the credit sales, the seller will issue a credit note.
What is the purpose of a debit note?
If the seller finds that there is an undercharge after the credit sales, the seller will issue a debit note to the buyer.
What is the purpose of a receipt?
When the seller sells goods and services to the buyer and collects money immediately, the seller will issue a receipt to the buyer.
What is the purpose of a cash register slip?
It is a receipt issued from a cash register which is commonly used in retail outlets.
What is the purpose of a remittance advice?
When the buyer pays for credit purchases, the business will prepare a payment voucher and a cheque.
What is the purpose of a payment voucher receipt?
The payment voucher has a remittance advice which states the invoice number and amount paid.
What is the purpose of a bank statement?
The bank will issue a weekly or monthly statement and states the deposits and payments made from the bank account.
What is a journal?
All business transactions are recorded in a journal.
What are the types of journals?
Special journals; Cash Book; General Journal.
What are the types of special journals?
Purchase journal, Purchase returns journal, Sales journal, Sales returns journal.
What is the purpose of the cash book?
To record all cash and cheques received and paid.
What is the purpose of the General Journal?
To record all other transactions not recorded in the special journals and cash book.
How are transactions recorded in the General Journal?
It is recorded in chronological order, and it includes the date, a narration (brief description), and the amount.
What is a ledger?
It keeps the business transactions of journals grouped by accounts.
What are the types of ledgers?
General Ledger, Subsidiary - Trade Receivables Ledger, Subsidiary - Trade Payables Ledger.
What is the purpose of the General Ledger?
This consists of all the ledger accounts, but excludes the individual trade receivables and individual trade payable ledger accounts.
What is the purpose of the Trade Receivables Ledger?
This consists of all the individual trade receivable ledger accounts.
What is the purpose of the Trade Payable Ledger?
This consists of all the individual trade payable ledger accounts.
What is the Trial Balance?
It is a summary of the balances of each ledger account in the General Ledger as at a specified date.
What comprises the financial report?
Income statement, Balance Sheet.
What is an income statement?
It is a financial statement that shows how much income, expenses, and profit or loss a company has over a period of time.
What is a Balance Sheet?
It is a financial statement that lists the assets, liabilities, and equity of a business at a given point of time.
What is the process of the accounting cycle?
Identifying and recording phase, Adjusting phase, Reporting phase, Closing phase.
What is the identifying and recording phase?
Source documents are sorted and the transactions recorded in the journals. The entries in the journals are then posted to the ledgers. These activities happen every day.
What is the adjusting phase?
The business checks that it has recorded all the transactions, and the Trial balance is usually prepared in this phase.
What is the reporting phase?
The financial reports are prepared. The reports must be prepared at least once in a financial year.
What is the closing phase?
The accounting information system is prepared for the next financial year. Closing is carried out at the end of the financial year, after which no transactions should be recorded.