Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Accounting > Chapter One > Flashcards

Chapter One Flashcards

1
Q

What is accounting?

A

Accounting is concerned with collecting, analysing and communicating financial information

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the purpose of accounting ?

A

to help user decision making

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Who are the users of accounting?

A
  1. owners
  2. managers
  3. government
  4. Community representatives
  5. employees
  6. customers
  7. competitors
  8. investment analysis
  9. lenders
  10. suppliers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the fundamental qualities of accounting ?

A
  1. Relevance

2. Faithful representation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What does relevance mean in terms of accounting ?

A

The information should make a difference

Predict future events and confirm past

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What does faithful representation mean in terms of accounting ?

A

It should represent what it’s meant to

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What three things are needed with faithful representation ?

A

Neutral
Complete
Free from error

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are all of the qualities of accounting ?

A 
relevance 
faithful representation
verifibility 
timeliness
comparability 
understandability
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the four steps of the accounting information system?

A
  1. information identification
  2. information recording
  3. information analysis
  4. information reporting
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is management accounting ?

A

Management accounting seeks to meet the needs of managers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what is financial accounting ?

A

financial accounting seeks to meet the needs of the other users

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What does comparability mean ?

A

The information needs to allow businesses to make comparisons easily

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does verifiability mean?

A

Ensures that the accounting information portrays what it is supposed to

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What does timeliness mean ?

A

This means that the information should be made available to users in good timing to enable good decision making for the users

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What does understandability mean?

A

This means that the information should be presented as clearly and consisely as possible

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is financial management ?

A

This is closely associated with acquiring and deploying short term and long term finance required by a business

17
Q

Which quality is materiality closely linked to ?

A

Relevance

18
Q

What is cost of sales ?

A

This is the cost price of the goods sold

19
Q

What does profit from operations mean ?

A

This is the profit made from trading, buying, making and selling

20
Q

What happens to the profit for the year from the income statement ?

A

It is transferred into the statement of changes in equity

21
Q

What is involved in the changes in equity statement ?

A
  1. Share capital

2. Retained earnings

22
Q

What is the statement of financial position ?

A

It is a snapshot of the company at a given date

23
Q

What is the order of the statement of financial position ?

A
  1. Non-current Assets
  2. Current assets
  3. Equity and liabilities
  4. Capital and reserves
  5. Non-current liabilities
  6. current liabilities
24
Q

What is the purpose of notes to accounts ?

A

this is where most of the detailed information is listed. However, sole traders and partnerships won’t have as much detail in their notes to the accounts because they are not governed by legal disclosure rules compared to limited companies which are.

25
Q

What happens if some of the qualities of accounting aren’t present in financial statements ?

A

The auditors report with state this

26
Q

What are the differences between financial accounts and management accounts ?

A
  1. Financial accounts look backwards while managment accounts look forwards and backwards
  2. financial accounts are primarily prepared for the owners while management accounts are mainly prepared for the directors/managers
27
Q

what does GAAP mean ?

A

Generally accepted accounting principles

It represents the large gap between the rules and regulations related to limited ocmpanies and sole traders etc.

28
Q

What are the differences between management accounting and financial accounting ?

A

MA - specific purpose, often very detailed, unregulated, reporting intervals are as short as required, based on future and past, contains financial and non-financial info.
FA - general purpose, broad overview, regulated, reporting intervals are annual or bi-annual, based on past, contains financial info.

29
Q

what do non-current assets with finite lives mean for a business ?

A

They provide benefits for the business for a limited period of time

30
Q

What do non-current assets with indefinite lives mean for a business ?

A

They provide benefits for the business for a foreseeable time limit

31
Q

net book value / written down value =

A

carrying amount

32
Q

What is a fair value ?

A

This is the price that a product could be sold for in the current market.

33
Q

Equation for the profit/loss for the period ?

A

total revenue - total expenses incurred in generating revenue

34
Q

What is gross profit ?

A

this is the profit made from buying and selling goods without taking any revenues or expenses associated with the business into account

35
Q

What is the equation for gross profit?

A

Revenue - cost of sales = gross profit

36
Q

What does operating profit mean?

A

This represents the wealth generated during the period from the normal activities of the business

37
Q

What is the equation for operating profit ?

A

Operating profit = gross profit - operating expenses

38
Q

How do we find out the profit for the period ?

A

operating profit + non operating income (interest receivable) - interest payables = profit for the period

39
Q

What is the matching convention?

A

This means that expenses should be should be noted in financial statements in the same accounting period that the revenue for the product is received

Accounting (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions