BUS FPX 2061 Assessment 2 Template

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BUS FPX 2061 Assessment 2 Template

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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 starts by identifying business transactions, which may include vendor payments, sales, or purchases. Once identified, these transactions are recorded in a journal or entered into accounting software to maintain accuracy and consistency. The journal entries are then posted to the general ledger, where transactions are organized by account type.

After posting, a trial balance is prepared to evaluate the company’s financial position and detect discrepancies. The worksheet is reviewed to confirm that total debits and credits are balanced. Adjusting journal entries are then made to correct errors or account for accrued items such as unpaid expenses or late payments.

Once adjustments are completed, the company prepares financial statements, including the balance sheet, income statement, and cash flow statement. Finally, the books are closed to mark the end of the accounting period and start a new cycle.

Examples of source documents include:

Type of Document	Purpose
Invoice	Records sales made on credit
Sales Receipt	Confirms a completed sale
Bank Statement	Verifies financial transactions with the bank
Purchase Order	Authorizes a purchase from a vendor

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 ongoing processes performed continuously throughout the accounting cycle. These steps ensure that financial information remains current and accurate during the entire accounting period.

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. This step finalizes the accounts, resets temporary balances (revenues, expenses, dividends), and prepares the company for the next financial cycle.

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

Ethical considerations play a vital role at every stage of the accounting cycle. Accountants must demonstrate honesty, integrity, and transparency when handling financial data. Ethical behavior includes avoiding conflicts of interest, maintaining confidentiality, and ensuring that financial transactions are recorded truthfully.

For example, accurate recording of transactions prevents the creation of misleading financial statements, which fosters trust among investors and stakeholders. Similarly, maintaining confidentiality protects sensitive company or client information, ensuring compliance with professional ethical standards.

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

The dividends account is used to record the amount of dividends declared and distributed to shareholders. This account increases when the company declares or pays dividends to its owners, representing a reduction in retained earnings due to profit distribution among shareholders.

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

The following table summarizes the debit and credit rules for balance sheet and income statement accounts:

Account Type	Increases With	Decreases With
Assets	Debit	Credit
Liabilities	Credit	Debit
Equity	Credit	Debit
Revenues	Credit	Debit
Expenses	Debit	Credit

These rules ensure that every financial transaction follows the double-entry accounting system, maintaining balance between debits and credits.

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

The general journal serves as a chronological record of all business transactions, providing a detailed account of each event as it occurs. The general ledger compiles all these transactions into specific accounts, offering a complete overview of the company’s financial activities.

Meanwhile, the chart of accounts functions as an organized listing of all account titles and numbers used in the ledger. It serves as the structural foundation for financial reporting and helps ensure consistency across the accounting system.

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

An unadjusted trial balance compiles all ledger account balances to verify that total debits equal total credits before adjustments are made. This process helps detect errors in recording or posting transactions.

Common accounts appearing on an unadjusted trial balance include:

Account Category	Examples
Assets	Cash, Inventory, Accounts Receivable
Liabilities	Accounts Payable, Notes Payable
Revenues	Sales, Service Revenue
Expenses	Rent, Salaries, Utilities

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?

A difference between the debit and credit totals may result from various errors. These can include recording an amount only on one side of the ledger, entering unequal debit and credit values, or omitting a transaction altogether. Mathematical miscalculations or incorrect postings in the journal or ledger can also lead to such discrepancies.

References

Horngren, C. T., Harrison, W. T., & Oliver, M. S. (2019). Accounting (12th ed.). Pearson Education.

Warren, C. S., Reeve, J. M., & Duchac, J. (2020). Financial and managerial accounting (15th ed.). Cengage Learning.

BUS FPX 2061 Assessment 2 Template

Porter, G. A., & Norton, C. L. (2018). Using financial accounting information: The alternative to debits and credits (10th ed.). Cengage Learning.

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