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Answers
Answer:
Question 1:
State the three fundamental steps in the accounting process.
ANSWER:
The fundamental steps in the accounting process are diagrammatically presented below.
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Question 2:
Why is the evidence provided by source documents important to accounting?
ANSWER:
The evidence provided by the source document is important in the following manners:
It provides evidence that a transaction has actually occurred.
It provides important and relevant information about date, amount, parties involved and other details of a particular transaction.
It acts as a proof in the court of law.
It helps in verifying transactions during the auditing process.
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Question 3:
Should a transaction be first recorded in a journal or ledger? Why?
ANSWER:
A transaction should be recorded first in a journal because journal provides complete details of a transaction in one entry. Further, a journal forms the basis for posting the transactions into their respective accounts into ledger. Transactions are recorded in journal in chronological order, i.e. in the order of occurrence with the help of source documents. Journal is also known as ‘book of original entry’, because with the help of source document, transactions are originally recorded in books. The process of recording the transactions in journal and then in ledger is presented in the below-given flow chart.
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Question 4:
Are debits or credits listed first in journal entries? Are debits or credits indented?
ANSWER:
As per the rule of double entry system, there are two columns of ‘Amount’ in the journal format namely ‘Debit Amount’ and ‘Credit Amount’. The way of recording in a journal is quite different from normal recording. Journal entry is recorded in journal format in which the ‘Debit Amount’ column is listed before the ‘Credit Amount’ column.
Credits are indented. Indentation is leaving a space before writing any word. Journal entry has its own jargon. While journalising, in the ‘Particulars’ column of journal format, debited account is written first and credited account is in the next line leaving some space, which is indentation.
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Question 5:
Why are some accounting systems called double accounting systems?
ANSWER:
Some accounting systems are called double accounting systems because under this system there are two aspects
Answer:
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