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Assignment on Fundamentals of Accounting

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Added on  2020-05-28

Assignment on Fundamentals of Accounting

   Added on 2020-05-28

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Fundamentals of Accounting
Assignment on Fundamentals of Accounting_1
Answer 1: The following steps are used in recording and posting the effects of a businesstransaction:Recording the transactions in Journal: This step involves identifying the type of eachaccount and determining whether it is being debited or credited. This is followed byrecording its entry in the journal.This step involves posting the journal entries into ledger in the specific debit and creditcolumnsThe source document used in these steps is invoice, bills, credit memo and deposit slip. The debit is an accounting entry that record increase in an asset whereas credit increases aliability (Porter and Norton, 2016). The type of accounts that are:Increased by debit: Accounts receivable, inventory and expense account. Decreased by debit: Notes payable, retained earnings and common stockIncreased by credit: Stockholders equity, liabilities and income accountDecreased by credit: Asset, expense and profitsAnswer 2: The steps that are performed throughout the accounting cycle are identifying thetransaction, developing the source document of the transaction, analyzing and recording thetransaction and at last posting it in the ledger accounts. The steps that are performed at lastincludes developing the trial balance, adjusting entries, financial statements, posting closingentries in ledger and preparing reverse journal entries. The most common type of accounting software packages that are used are freshbooks,Xero and QuickBooks online. I would adopt the use freshbooks in starting a small business as ithas high scalability (Wevgandt, 2007).Answer 3: The main reason for developing distinct accounts for expense and revenue is due tolarge number of entries related to these accounts during the overall accounting cycle. Forexample, the payment received for services that is to be provided would be included underunearned income while the payments for services that are delivered would be recorded in theearned income as revenue. The revenue account will positively impact the new income with the realization of cashwhile expenses would have negative effect due to expenditure incurred for carrying out itsdifferent activities while retained income will also increase the income account as it is a financialgain. The dividend account is prepared for depicting the profit available for the shareholdersand the owners. The account would be increased if there is increase in the profitability positionof a company and decrease with the reduction in net income for an accounting period (Porter andNorton, 2016).
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