1 What are generally accepted accounting principles (GAAP)?
They are the rules and laws that were agreed upon upon registration, classification and preparation of financial reports, and they were issued by the Financial Accounting Standards Board (FASB), and among the most important generally accepted accounting principles are:
The principle of matching revenues with expenses
The historical cost principle
Revenue recognition principle
Principle of caution
The principle of constancy
2 What is the way to know the debit account from the credit account?
In practical life, the debtor is the person who has a debt in favor of the creditor. In accounting, there are two ways to determine the debit account from the credit account when recording the entry in the journal:
The taker and giver:
This method assumes that the debit account is the account that takes, and the credit account is the account that gives.
Determine the nature of the account
Through this method, the accounts are divided into two parts, accounts of a debit nature and accounts of a credit nature, and the person must keep in mind that the accounts of a debit nature include the accounts of assets and expenses and the account of personal withdrawals, while the accounts of a credit nature include the liabilities account, the revenue account and the capital account, These accounts are characterized by the following:
Recorded on the debit side when increasing, and recorded on the credit side when decreasing
Its balance is mostly debit
It is recorded on the debit side when there is a decrease, and it is recorded on the credit side when it increases
Its balance is mostly in credit
What is the difference between the cash basis and the accrual basis?
According to the cash basis, revenue is recognized when its value is received from others, and expenses are also recognized as soon as they are paid to others, whether those revenues or expenses relate to the current period or not, but according to the accrual basis, revenue is recognized in the period in which the goods are sold or Providing the service to others, whether its value has been received from the customer or not, and the expenses related to the current period are recognized whether they have been paid or not.
4 What is the difference between prepaid and accrued expenses?
Expenses paid in advance: They are the expenses that were paid during the current period, but they are related to the next financial period. Therefore, according to the accrual basis, these expenses are excluded from the expenses balance shown in the trial balance, and this account appears in the statement of financial position as an asset of the company.
Accrued Expenses: These are the expenses that pertain to the current period and have not been paid yet and have not appeared in the balance of expenses. Therefore, according to the accrual basis, the expense is recognized and this account appears in the statement of financial position in the liabilities side.
What is the difference between revenue received in advance and revenue due?
Revenues received in advance: These are the revenues that were received during the current period, but they belong to the next financial period. Therefore, according to the accrual basis, these revenues are excluded from the balance of revenues shown in the trial balance, and this account appears in the statement of financial position in the liabilities side.
Accrued revenue: It is the revenue that pertains to the current period and has not yet been collected and has not appeared in the revenue balance. Therefore, according to the accrual basis, the revenue is recognized and this account appears in the statement of financial position on the assets side.
6 What are the steps of the accounting cycle?
Preparing the document and analyzing the financial process
Posting to the ledger
Preparation of trial balance
Preparing inventory settlement entries
Preparing the trial balance after the inventory adjustments
Preparing financial statements
Closing temporary accounts
Preparing the trial balance after closing
7 What are the types of financial transactions?
Types of financial transactions
The financial operations carried out by the establishment, which are recorded in the books, are divided into the following sections:
It includes the operations that occur as a result of the establishment's conducting its basic activity, whose objective of practicing this activity is to make a profit, such as the purchase and sale of goods, expenses paid for salaries, wages, electricity, and others.
It includes the operations that occur as a result of the establishment’s purchase of fixed assets, the purpose of which is to assist the establishment in carrying out its activity, and the aim of their acquisition is not to resell them and make a profit from them, such as the purchase of lands, buildings, production lines, the purchase of office furniture, computers, etc., as well as the operations that occur As a result of dispensing and disposing of these assets after the end of their useful life.
It includes the operations that occur to finance the establishment with cash amounts and in-kind assets so that the establishment can carry out its activity, and this financing is either obtained from internal sources from the owners of the establishment, which is represented by capital, or obtained from external sources from others in the form of loans.
8 What are the types of accounts in accounting?
The relationship between them can be represented by the following equation, which is called the accounting equation or the budget equation:
Assets = Liabilities + Capital - Personal Withdrawals + Revenues - Expenses
9 What is the difference between a bookkeeper and an accountant?
Accountant: He is the one who establishes the accounting system, defines and records financial operations, and presents reports and financial information to decision makers.
Bookkeeper: He is the one who records financial transactions according to generally accepted accounting principles. The accountant’s job is broader and more comprehensive than the bookkeeper.
10 What are the settlement restrictions? Why is it being prepared?
They are entries through which the balances of some accounts are modified, so that they are prepared after preparing the trial balance and auditing the accounts, in application of the generally accepted accounting principles
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