Acc - 1.1, 1.2

Question 1

accounting - definition

Answer 1

1. collecting
2. recording
3. classifying
4. summarising
5. analysing
6. interpreting
7. communicating

financial data

Question 2

accounting - purpose

Answer 2

• provide financial info
• for decision making
• monitors progress
• shows profitability, net worth & liquidity
• shows interested parties about business performance / position

Question 3

book keeping - definition

Answer 3

involves collecting, recording, storing & retrieving financial data from business

Question 4

basic difference - book keeping vs accounting

Answer 4

book keeping : recording
accounting : recording + understanding + decision making

Question 5

profit & loss - purpose

Answer 5

• assess business performance
• to compare with year before & competitors
• indentify areas / ways to reduce costs / increase revenue
• help decide to expand, invest, change strategy

Question 6

financial data - overview

Answer 6

• info that can be measured in money
• recorded in accounting records
  eg. cash sales, purchases of equipment, rent paid

Question 7

interested parties - their need for accounting

Answer 7

1. owners : profitability and net worth
2. creditors : ability to pay debts
3. banks : should they grant loans
4. government : calculate tax
5. investors : worth investing
6. managers : control, plan & decision making

Question 8

trade payables - definition

Answer 8

business / individuals to whom money is due for services / goods supplied to the business

Question 9

accounting equation - 3 ways

Answer 9

1. C = A - L
2. A = C + L
3. L = A - C

Question 10

• capital
• assets
• liability

Answer 10

• capital : money invested by owner
• asset : resouces owned by business
• liability : debt owed by business

Question 11

• current assets
• non current assets

Answer 11

• current: used / sold within 1 year (eg. trade recieveable, inventory
• non - current : used / sold for more than 1 year (eg. machinery, equipment)

Question 12

liquid asset

Answer 12

converted to cash with no loss in value

Question 13

• current liability
• non-current liability

Answer 13

• current : debt must be paid within 1 year (eg. bank overdraft, trade payable)
• non-current : debt can be more than 1 year (eg. bank loan,