| What are the 10 steps in the accounting processing cycle? | 1.Obtain information about external transactions from source documents. 2.Transaction analysis. 3.Record the transaction in a journal. 4.Post from the journal to the general ledger accounts. 5.Prepare an unadjusted trial balance. 6.Record adjusting entries and post to the general ledger accounts. 7.Prepare an adjusted trial balance. 8.Prepare financial statements. 9.Close the temporary accounts to retained earnings (at year-end only). 10.Prepare a post-closing trial balance (at year-end only).
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| What is a trial balance? | A trial balance is a list of general ledger accounts and their balances at a particular date.
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| What is the purpose of the statement of cash flows? | The purpose of the statement of cash flows is to summarize the transactions that caused cash to change during the period.
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| What are permanent general ledger accounts? temporary accounts? | Permanent accounts represent assets, liabilities, and shareholders' equity at a point in time. Temporary accounts represent changes (the retained earnings component of shareholders' equit for a corporation) caused by revenue, expense, gain, and loss transactions.
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| Which situations require adjusting entries? | Adjusting entries are necessary for three situations: 1) Prepayments, sometimes referred to as deferrals; 2) Accruals; 3) Estimates.
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| How are prepaid expenses initially recorded? | Prepaid expenses represent assets recorded when a cash disbursement creates benefits beyond the current period.
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| How do the income statement and the balance sheet differ? | The income statement is a change statement that summarizes the operating transactions that caused shareholders' equity (retained earnings) to change during the period. The balance sheet is a position statement that presents an organized list of assets, liabilities, and equity at a particular point in time.
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| How are unearned revenues initially recorded? | Unearned revenues represent liabilities recorded when cash is received from customers in advance of providing a good or service.
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| What journal entry is recorded for an accrued liability? | The adjusting entry required to record an accrued liability is a debit to an expense and a credit to a liability.
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2001 McGraw-Hill Higher Education