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Describe the Accounting Information System
The collection and processing of transaction or data and communicating of financial information to interested parties is known as the Accounting Information System.
Describe the steps in the recording process
1) Identify the transactions and analyse the effects each transaction has on the accounts
2) Enter the transaction information in a journal.
3) Transfer the journal information to a ledger.
Are debit/credit balances favourable or unfavourable?
They are neither favourable nor unfavourable. A debit balance simply means that the amount of debit exceeds the amount of credit and vice versa.
What is a Journal?
Provides chronological record of all transactions.
It keeps in one place the complete effect of transactions which helps to prevent or locate errors.
What is a Ledger?
A ledger is the entire group of accounts maintained by an entity, it keeps in one place the transaction information and changes brought about to the specific account balances.
What is a trial balance and what are its purposes?
A list of accounts and their balance at a given time.
The purposes of a trial balance are:
1) Prove mathematical equality of debit and credit after posting.
2) Uncover possible errors in journalising and posting.
3) Useful in the preparation of a financial statement.
Why is a Chart of Accounts important?
1) Helps organise the accounts
2) Helps identify the location of accounts in a ledger
3) Facilitates the recording process
List the type of Debit/Credit Accounts
Debit:
Dividends
Expenses
Assets
Credit:
Share Capital
Liabilities
Revenue
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