Chapter 1 - Introduction to Accounting Flashcards Preview

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Flashcards in Chapter 1 - Introduction to Accounting Deck (28)
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0
Q

What are business transactions?

A

Are occurrences that affect the assets, liabilities and equity items in an entity and must be recognised

1
Q

What is accounting?

A

The process of identifying, measuring and communicating economic information about an entity to a variety of users for decision-making purposes

2
Q

What is relevant information?

A

Information that makes a differences in decision making

3
Q

What is bookkeeping?

A

The recording and summarising of financial transactions and the preparation of basic reports

4
Q

What is the process of accounting?

A

Identifying, measuring, communicating and decision making

5
Q

What is internal users?

A

Managers of the entity who use the information to assist in various management functions

6
Q

What are external users?

A

Parties outside the entity who use the information to make decisions about the entity

7
Q

What is financial accounting?

A

The preparation and presentation of financial information for users to enable them to make economic decisions regarding the entity

8
Q

What is historical cost?

A

The original amount paid to be received for an item

9
Q

What are financial statements?

A

A set of statements directed towards the common information needs if a wide range of users

10
Q

What is a statement of cash flows?

A

A statement that reports on the entity’s cash inflows and cash outflows for a specified period

11
Q

What is an income statement?

A

Statement that reports on the income and expenses of an entity for a period, and the resulting profit or loss

12
Q

What is a balance sheet?

A

Statement that reports on the assets, liabilities and equity of an entity at a particular point in time

13
Q

What is management accounting?

A

A field of accounting that provides economic information for use by management in internal planning and decision making

14
Q

What are the differences between financial accounting and management accounting?

A
  1. Regulations
  2. Timeliness
  3. Level of detail
  4. Main users
15
Q

Discuss the globalisation of financial reporting

A
  • countries adopting the IFRS

- this will meet the needs of all users as entities are becoming larger, more diversified and multinational

16
Q

What is a disclosing entity?

A

An entity that issues securities that are quoted on a stock market or made available to the public via a prospectus

17
Q

What are general purpose financial statements?

A

Financial statements prepared to meet the information needs common to external users

18
Q

What are special purpose financial statements?

A

Financial statements prepared to suit a specific purpose

19
Q

What are the fundamental characteristics?

A

Relevance and faithful representation

20
Q

What are the enhancing qualitative characteristics?

A

Comparability, verifiability, timeliness and understandability

21
Q

What is profit?

A

Income less expenses

22
Q

What is an asset?

A

A resource controlled by the entity as a result of a past event and from which future economic benefits are expected to flow to the entity

23
Q

What is a liability?

A

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits

24
Q

What is equity?

A

The residual interest in the assets of te entity after all it’s liabilities have been deducted

25
Q

What is income?

A

Increases in economic benefits during the accounting period in the form of inflows, or decreases of liabilities that result in increases in equity

26
Q

What is an expense?

A

Decrease in economic benefit

27
Q

What are the limitations of accounting information?

A

Time lag, historical information and subjectivity of information