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Bookkeeping Week 2 Exam with complete solutions
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Bookkeeping Week 2 Exam with complete solutions
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Bookkeeping Week 2 Exam withcomplete solutions
What "is a list of all of the accounts that can be impacted by their financial transactions,
organized by assets the company owns, liabilities the company owes, equity accounts,
revenue accounts and expense accounts"? - Answer -Chart of accounts
The chart of accounts is the backbone of a business's financial organization; it is a list of
all of the accounts that can be impacted by their financial transactions, organized by
assets the company owns, liabilities the company owes, equity accounts, revenue
accounts, and expense accounts.
What is one of the most common bookkeeping mistakes that business owners make -
Answer -They have too many accounts in their chart
Assessing what accounts are listed in the chart of accounts will be an ongoing task for
you. Having too many accounts on a chart of accounts can make information more
dispersed and complicated than it needs to be. For example, CPA Mike Jesowshek
notes that one of the most common bookkeeping mistakes that business owners make
is having too many accounts in their chart, such that the data becomes diluted and not
useful. Jesowshek notes that bookkeepers can help their clients out in these situations
by simplifying related accounts into one account. "Unless there are significant expenses
that make separating it out useful," he notes.
What is a potential downfall to the cash method of accounting? - Answer -It isn't great
for big-picture financial planning
Some potential downfalls to the cash method of accounting are as follows:
● It doesn't give you robust information about outstanding invoices or bills that need to
be paid, since financial transactions aren't recorded until money is exchanged.
● It isn't great for big-picture financial planning. For example, if you receive a big deposit
but have a variety of expenses to be paid at a later date, this will not show up in the
books until later. This gives the illusion of having a "really great" (month, quarter, etc.) at
the time of the deposit, and a "really bad" month when the payments become due, when
in reality it is all balancing out.
According to a business bank account, the following transactions have taken place:
The business owner invested $2,000 in their own business for start-up costs.
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