Situations for discussion

Situation 1.

Ms.Nelson starts a new business. Ms. Nelson uses her personal car in the business with the expectation that later a business can buy a car. All expenses for operating the car, including license plates, gasoline, oil, tune ups, and new tires, are paid for out of business funds. Is this an acceptable procedure? Explain your answer.

Situation 2.

ANYcompany makes some sales for cash. For some sales however cash is not received until a later date. NNN company record sales only when cash is actually received. Which accounting concept is not being followed in this procedure? Explain your answer.

Situation 3.

Mr. Smith owns his own business, and he uses a monthly accounting period. He spends cash for business expenses while he is away from the business. When this happens, he writes the amounts spent on a piece of paper he carries in his appointment book. Whenever he thinks of it, usually several weeks later, he summarizes these amounts and records in the business records one entry for the total expenses. Which accounting concept is not being followed with this procedure? Explain your answer.

CHAPTER II

THE ACCOUNTING PROCESS

The chapter describes the main steps of accounting process and explains the essence of double-entry bookkeeping system.

After studying this unit you should be able to:

1. Define accounting terms related to starting an accounting system.
2. Analyze accounting equation.
3. Use T accounts to analyze transactions showing which accounts are debited or credited for each transaction.
4. Enumerate all the steps of the accounting cycle.
5. Understand the purpose of double-entry bookkeeping system.

Active vocabulary:

accounting equation – бухгалтерське (балансове) рівняння

assets – активи

disbursement – виплата

dual aspect – подвійний аспект

entry – запис

equity – частка власності

general ledger –головна бухгалтерська книга

generally accessible –загальнодоступний

inventory – товарні запаси

invoice – рахунок-фактура, накладна

liabilities – пасиви

liability account – рахунок пасивів.

nominal account – номінальний рахунок; тимчасовий рахунок, що показує нарахування доходів та витрат лише за звітній період

on a continual basis – постійно

posting – проводка

real accounts – реальні рахунки; рахунки балансу; рахунки, на яких залишки зберігаються і після закінченні звітного періоду

receipt – квитанція

source document – первинний документ

to maintain the balance – підтримувати баланс

trial balance – пробний баланс.

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