BUS FPX 2061 Assessment 2 Template

BUS FPX 2061 Assessment 2 Template

Student Name

Capella University

BUS-FPX2061 Accounting Fundamentals

Prof. Name:

Date

Part 1: Accounting Cycle

1. Describe the steps in recording and posting the effects of a business transaction. Provide some examples of source documents used in these steps.

The accounting process begins with identifying business transactions such as sales, purchases, or vendor payments. Next, transactions are recorded in a journal or entered into accounting software to ensure accuracy and consistency. These journal entries are then posted to the general ledger, which organizes all transactions by account type. A trial balance is prepared to evaluate the company’s financial position and identify potential discrepancies. The worksheet is analyzed to ensure that total debits and credits are balanced. Adjusting journal entries are made to correct any errors or account for accrued items, such as a late payment of accounts payable. After adjustments, financial statements—including the balance sheet, income statement, and cash flow statement—are prepared. Finally, the books are closed to complete the accounting period and begin a new cycle.
Examples of source documents include invoices, sales receipts, bank statements, and purchase orders.

2. Which steps in the accounting cycle are performed throughout the accounting cycle?

Steps 1 through 4—identifying, recording, posting transactions, and preparing trial balances—are performed continuously throughout the accounting cycle.

3. Which of the steps in the accounting cycle are performed only at the end of the accounting period?

Step 8, which involves closing the books, is performed only at the end of the accounting period.

4. How do ethical considerations impact each stage of the accounting cycle? Provide specific examples.

Ethical behavior is essential at every stage of the accounting cycle. Accountants must avoid conflicts of interest and maintain professional integrity in all financial dealings. Confidentiality should be upheld when handling client or company financial information. Ethical practices such as honesty, transparency, and accuracy help ensure reliable financial reporting and build trust with stakeholders. For example, recording transactions truthfully prevents misleading financial statements and promotes accountability.

5. What is the purpose of the “dividends” account? Under what circumstances would this account be increased?

The dividends account tracks the amount of dividends declared and paid to shareholders. This account increases when the company declares or distributes dividends to its owners, reflecting a reduction in retained earnings due to profit distribution.

6. What are the rules of debit and credit for accounts appearing on a firm’s balance sheet and income statement?

• Assets: Increase with a debit; decrease with a credit.

• Liabilities: Increase with a credit; decrease with a debit.

• Equity: Increase with a credit; decrease with a debit.
  These rules ensure that all transactions are recorded accurately within the double-entry accounting system.

7. Describe the nature and purposes of the general journal, ledger, and chart of accounts.

The general journal provides a chronological record of all business transactions. The general ledger compiles all of these transactions by account, providing a complete record of financial activity. The chart of accounts is a structured list of all account titles and numbers used in the ledger, serving as an organizational framework for financial reporting.

8. What are the purposes of an unadjusted trial balance? Describe the types of accounts that would appear on this type of trial balance.

The unadjusted trial balance summarizes all ledger account balances in one place to ensure that total debits equal total credits before adjustments are made. It helps identify potential posting or recording errors. Common accounts appearing on an unadjusted trial balance include assets (such as cash and inventory), liabilities (such as accounts payable), revenues, and expenses.

BUS FPX 2061 Assessment 2 Template

9. If you found that the total of the debit column of the trial balance is $200,000, while the total of the credit column is $180,000, what are some possible causes of this difference?

The discrepancy could result from an incorrect journal entry—such as recording an amount only on one side of the ledger or entering unequal debit and credit values. Other possible causes include mathematical errors, incorrect postings, or omissions of certain transactions.