ABKN602 Accounting and Bookkeeping Fundamentals Practice Exercise Three - Suggested Solutions | The Career Academy NZ

Accounting and Bookkeeping Fundamentals Practice Exercise Three - Suggested Solutions

Check Your Answers Great! Now that you have completed the practice exercise to the best of your ability, compare your answers to the suggested solution provided below. Take note of any discrepancies or areas for improvement. If you encounter any difficulties or have questions while working on the practice exercise, our tutors are available to assist you during business hours. Feel free to reach out to them for clarification or guidance. 

Suggested Solutions 

Part A: Short Answer Questions

Question 1

In this first course you are introduced to basic accounting concepts and terminology. Imagine you caught up with your friend over the weekend and you tell them rather excitedly you have just started this course. Your friend then asks you "Is accounting and bookkeeping the same thing?" Based on what you have learnt so far how would answer this question? 

Please write at least a paragraph, making sure your answer is in your own words. Bookkeeping is the process of recording daily transactions in a consistent way and is a key component to building a financially successful business.

Accounting is a high- level process that uses financial information compiled by a bookkeeper or business owner and produces financial models using that information.

The process of accounting is more subjective than bookkeeping, which is largely transactional. 

Bookkeeping is comprised of: 

• Recording financial transactions.
• Posting debits and credits.
• Posting debits and credits. 
• Producing invoices.
• Maintaining and balancing subsidiaries, general ledgers, and historical accounts.
• Completing payroll. 

Accounting is comprised of:

• Preparing adjusting entries (recording expenses that have occurred but aren't yet recorded in the bookkeeping process).
• Preparing financial statements.
• Analysing costs of operations.
• Completing income tax returns.
• Aiding the business owner in understanding the impact of financial decisions. 

The process of accounting provides reports that bring key financial indicators together. The result is a better understanding of actual profitability and an awareness of cash flow in the business.

Accounting turns the information from the ledger into statements that reveal the bigger picture of the business, and the path the company is progressing on. Business owners will often look to accountants for help with strategic tax planning, financial forecasting, and tax filing.