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N-LVL > Poa > Flashcards

Poa Flashcards

1
Q

What is a trading business

A

Buys goods from suppliers and sells to customers

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2
Q

What is a service business

A

Provides services to its customers

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3
Q

What is a stakeholder

A

A group of people who use information of business to make decisions

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4
Q

Give me two stakeholders

A

Customers: Buys goods or services from the business
Suppliers: Supplies goods and/or services to the business

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5
Q

What is the role of accounting

A

Provides information for decision making by stakeholders and business owners to make informed decisions regarding the management of resources and performance of business

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6
Q

What is the role of an accountant

A

Act as a steward of the business to preparing and providing accounting information for stakeholder decision making

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7
Q

Two professional ethics

A

Integrity: Being straight forward and honest in all professional and business relationships
Objectivity: Not letting bias, conflict of interest and undue influence of others override professional judgement

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8
Q

What theory is applied for business transactions

A

Monetary Theory

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9
Q

What is Monetary Theory

A

Monetary theory states that only business transactions that can be expressed in monetary terms are recorded in the books

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10
Q

What is a cash transactions

A

When payment is made at the point of sale or purchase

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11
Q

What is credit transaction

A

When payment is delayed or postponed at a later date from the point of sale or purchase

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12
Q

What is the accounting cycle

A

Identify and record
Adjust
Report
Close

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13
Q

What is source documents

A

Provide proof that transaction has occured

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14
Q

What 2 theory are applied for source documents

A

Objectivity theory
Historical cost

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15
Q

What is objectivity theory

A

Provides evidence to capture occurrence of transaction

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16
Q

What is historical cost theory

A

Transaction is recorded at the original cost that is occured

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17
Q

What is the accounting information cycle

A

Source Documents
Journal
Ledger
Trial balance
Financial statements

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18
Q

What is receipt

A

Acknowledge payment received from customer

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19
Q

What is invoice

A

Informs credit customers of amount owed after the sale of goods or provision of service on credit

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20
Q

What is credit note

A

Reduces the amount owed by credit customers due to overcharges or return of goods

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21
Q

What is debit note

A

Increase the amount owed by credit customer due to undercharges

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22
Q

Payment voucher

A

Process payment by credit suppliers

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23
Q

Bank statement

A

Check and tallies business cash at bank account

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24
Q

What are assets

A

Resources owned or controlled by the business to carry out its business activities

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25
Q

What are liabilities

A

Amount the business owes to other business or other people

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26
Q

What is equity

A

Amount contributed by owners and profit generated by the business

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27
Q

What is income

A

Amount earned through the main activities of the business

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28
Q

What is sales revenue

A

Amount earned from a trading business selling goods

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29
Q

What is service fee revenue

A

Amount earned from a service business from providing services

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30
Q

What is other income

A

Income not earned from the main activities of the business

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31
Q

What is the theory applied for accounting equation

A

Accounting entity theory

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32
Q

Basic accounting equation

A

Assets = Liabilities + Equity

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33
Q

Expanded accounting equation

A

Asset = Liability + Capital + Income - Expense - Drawings

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34
Q

What is accounting entity theory

A

Activities of the business are separate from the actions of the owner

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35
Q

What is ALICE

A

Assets
Liabilities
Income
Capital
Expense

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36
Q

What is ledger account

A

Consolidation of all transactions affecting to a specific asset, liability income equity and expense

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37
Q

What is trade discount

A

Reduces list price amount
To encourage customers to buy in bulk, to buy more regularly to instil customer loyalty

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38
Q

What is cash discount

A

Reduces invoice amount
To encourage credit customers to pay early within a certain time

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39
Q

What is discount allowed

A

It is an expense and will decrease profit
Recorded with trade receivable

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40
Q

What is discount received

A

It is an income and will increase profit
Recorded with trade payable

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41
Q

What is the purpose of trial balance

A

Check for arithmetic errors
To prepare financial statements

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42
Q

What theories are applied for financial statements

A

Going concern
Accounting period

43
Q

What is going concern theory

A

Business is assumed to operate for indefinite amount of time

44
Q

What is accounting period theory

A

Financial statements are prepared at regular time intervals to provide timely information for stakeholders to make decisions

45
Q

Purpose of statement of financial performance

A

To show income and expense incurred for the period of time
Informs stakeholder profitability of business

46
Q

Purpose of statement of financial position

A

Lists assets, liabilities and equity of business at a specific date
Provides information on how resources are obtained and used in the business

47
Q

What are non-currents assets

A

Assets which are bought for the business to generate income
Can be used for more than a year

48
Q

What are currents assets

A

Assets which are easily converted into cash
Expected to be sold or used up within one accounting year

49
Q

What are non-current liabilities

A

Debts which are due for settlement beyond one accounting year

50
Q

What are current liabilities

A

Debts which are due for settlement within one accounting year

51
Q

What theory is applied for sale revenue

A

Revenue recognition theory

52
Q

What is revenue recognition theory

A

Revenue is recognised once goods are sol or delivered

53
Q

Which accounts are closed to the income summary

A

Sales revenue
Service fee revenue
Sales returns
Cost of sales
Other income
Other expenses

54
Q

What is income received in advance

A

Income received but service has not been provided

55
Q

What is income receivable

A

Service has been provided but amounts have not been received

56
Q

What theory is applied for income receivable, received in advance, prepaid expense, expense payable

A

Accrual basis of accoutnting

57
Q

What is accrual basis of accounting

A

Regardless of payment has been made or not, transactions should be recorded in the relevant accounting period

58
Q

What are expenses

A

Cost incurred in the operation of a business to earn income in the same accounting period

59
Q

What theory is applied for cost of sales

A

Matching theory

60
Q

What theory is applied for other expense

A

Matching theory

61
Q

What is matching theory

A

Matching theory states that the expenses incurred must be matched against income earned in the same period to determine the profit for that period

62
Q

What is expense payable

A

Business have used used services but have not paid

63
Q

What is prepaid expense

A

Business has not used the service but has paid

64
Q

What is cash in hand

A

Physical cash business keeps in its office

65
Q

What is cash at bank

A

Cash deposited in the bank

66
Q

What are dishonured cheques

A

When the bank rejects the cheque

67
Q

Two reasons for dishonured cheques

A

Cheque is expired
Cheque is post dated

68
Q

Two purposes of internal control

A

Safeguard assets of business
Comply with law and regulation

69
Q

What is the purpose of internal control over cash

A

Cash is highly portable so it is done to reduce possibility of thefts or errors

70
Q

Two internal controls

A

Custody of cash- Secure cash and cheques in locked storage
Authorisation - Obtain proper approvals for all payments from authorised personnel

71
Q

What is bank reconciliation

A

When the business finds its cash at bank balance is different from the bank statement balance, bank reconciliation is carried out to find the transactions

72
Q

Cause of difference between cash at bank and bank statement balance

A

Timing difference

73
Q

What are inventories

A

Refers to goods bought from the business to sell to their customers and are kept to avoid stock-out situation

74
Q

Accounting information for buying inventories

A

Cost of inventory and Gross profit margin

75
Q

Non accounting information for buying inventories

A

Customer preference and type of storage

76
Q

What is FIFO

A

Goods that are purchased first are assumed to be sold first

77
Q

What is impairment loss

A

When selling price is lowered to below cost price due to unforeseen circumstances

78
Q

What theory is applied for impairment lose

A

Prudence theory

79
Q

State prudence theory

A

To avoid overstate of assets, profit and and income and understating liabilities, loses and expenses

80
Q

How is inventory valued at

A

Valued at the lower cost and realisable value

81
Q

Accounting information for trade receivables

A

Trade receivable information and credit terms and cash discountN

82
Q

Non-accounting information

A

Reputation of customers and economic outlook

83
Q

What is allowance for impairment of

A

Amount estimated to be uncollectible

84
Q

What theory is applied for allowance for impairment

A

Prudence

85
Q

What is Capital expenditure

A

Provides benefits for more than one year
Brings NCA to intended use

86
Q

What is revenue expenditure

A

Provides benefits that will be used within one year
Operates, maintains and repairs the NCA in working condition

87
Q

What theory is applied for NCA

A

Materiality Theory

88
Q

What is materiality theory

A

Relevant information should be reported in the financial statements if it is likely to make a difference to the decision-making process

89
Q

What is depreciation

A

Allocation of the cost of a NCA over its estimated useful life

90
Q

What is the theory applied for depreciation

A

Matching and consistency

91
Q

What is accumulated depreciation

A

Total depreciation up to date

92
Q

Causes of depreciation

A

Usage over time and Physical wear and tear from usage and exposure

93
Q

Straight line method

A

Decreases profit equally and decreases NCA equally

94
Q

Reducing balance method

A

Decreases profit higher in the early years same with NCA

94
Q

Accounting information for trade payable

A

Cost of NCA
Cost of inventory

94
Q

What is consistency theory

A

Once accounting method is chosen, it should be applied to all future accounting periods to enable meaningful comparison

94
Q

Non-accounting information for trade payable

A

Local or overseas suppliers
Reputation of supplier

94
Q

Bank loan

A

Borrowed for more than one financial year
Recorded under non-current liablities

94
Q

Bank overdraft

A

Borrowed for less than on financial year
Recorded under current liabilities

95
Q

What is interest expense

A

Amount charged on business when taken a loan

95
Q
A
95
Q
A
95
Q
A

N-LVL (6 decks)

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