chapter 2 definitions 3+4

Question 1

what is capital expenditure

Answer 1

is the purchase of, or improvement of non current assets

Question 2

what is revenue expenditure

Answer 2

revenue expenditure is day to day running costs of the business

Question 3

what is capital income

Answer 3

capital income is income from the sales of capital assets of the business

Question 4

what is revenue income

Answer 4

revenue is income is income generated from the sale of goods or services

Question 6

what are the 3 principles of double entry bookkeeping

Answer 6

dual effect principle

separate entry principle

the accounting equation

Question 8

what is the dual effect principle

Answer 8

this states that every transaction has two effects

Question 9

what is the the simple accounting equation

Answer 9

asset = liability

Question 10

what is the account equation when the owners capital is a special form of liability

Answer 10

assets = liabilities + capital

or

assets -liabilities = capital

Question 11

profit will increase the proprietors capital and drawings will reduce it what is the account equation for this situations

Answer 11

assets - liabilities = capital + profit - drawings

Question 13

what is the separate entry principle

Answer 13

the owner of the business and the business are seen as two separate entities. all transactions are recorded in the point of view of the business