Concept explainers
Accounting Cycle:
Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.
To Explain: The difference between external events, and internal events.
Explanation of Solution
- External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
- Examples of external events are as follows:
-
- a) Borrowing of cash from bank
- b) Purchase of inventory
- c) Sale to a customer
- Examples of internal events are as follows:
-
- a) Accrual of salary expense
- b)
Depreciation expense - c) Expiry of prepaid rent
External events:
External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.
To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.
Answer to Problem 1RQ
The supplies purchased by a company from a local vendor would be classified as an external transaction.
Explanation of Solution
When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.
Hence, the supplies purchased by a company from a local vendor would be classified as an external transaction.
Want to see more full solutions like this?
Chapter 2 Solutions
FINANCIAL ACCOUNTINGLL W/CONNECT >IC<
- Which of the following is not a characteristic of FOB Destination? A. The seller pays for shipping. B. The seller owns goods in transit. C. The point of transfer is when the goods leave the sellers place of business. D. The point of transfer is when the goods arrive at the buyers place of business.arrow_forwardWhat is the difference between a wholesale business and a retail business?arrow_forwardWhich of the following is not a characteristic of FOB Shipping Point? A. The buyer pays for shipping. B. The buyer owns goods in transit. C. The point of transfer is when the goods leave the sellers place of business. D. The point of transfer is when the goods arrive at the buyers place of business.arrow_forward
- What specific accounts are recognized when a business purchases equipment on credit?arrow_forwardAll else equal, when a firm purchases raw material on credit from its supplier, which of the following accounts is affected? a. Accounts Receivable b. Notes payable c. Expense Payable d. Accounts payablearrow_forwardWhich of the following is an agent in a purchases and payments structure model? Question 6Answer a. Cash disbursement b. Inventory c. Employee labour d. Supplier e. Receipt of goodsarrow_forward
- Which of the following is NOT a financial transaction? a. purchase of products b. cash receipts c. update valid vendor file d. sale of inventoryarrow_forwardWhich of the following functions is not included in the typical expenditure cycle involving goods? A. Disbursing payments to the vendors B. Placing an order for goods or services C. Posting to the accounts payable subsidiary ledger D. Processing a credit memo E. Ascertaining the validity of payment obligationsarrow_forward1. Sales revenue should be recognized when: a. sales are invoiced. b. payment is received from the customer. c. the customer's order is received. d. goods are shipped.arrow_forward
- (A) Explain the fundamental purpose of the sales and collection process. (B) Differentiate between a remittance advice and a customer invoice within the sales process of an organisationarrow_forwardWhich of the following is not a vendor transaction? Multiple Choice Order products Pay bills Make deposits Receive billsarrow_forwardWhich of the below mentioned PPIs issued by an entity for facilitating the purchase of goods and services from that entity only a. Closed System PPI's b. Semi Closed System PPI's c. Open System PPI's d. NPCIarrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeAuditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage LearningCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub