Lesson 1 Flashcards
(10 cards)
What is the ledger account?
Each ledger account balance in the trial balance is totalled & summarized into financial statement categories (assets, liabilities, capital, income, or expenses).
What is the statement of financial position?
Provides an overview of a business’s assets, liabilities, and capital at the financial year-end.
What is the statement of profit or loss?
Summarizes a business’s income & expenses during the financial year
What is the profit or loss?
Is the net of the business’s income & expenses.
What is the trial balance?
• Each ledger account balance is closed off, and the account balance flows to the trial balance.
• The trial balance is a list of each ledger account’s closing balances
• The trial balance should have equal debit & credit balances
What is a general ledger?
• Contains all the ledger accounts used by a business for the purpose of producing the financial statements
• Contains separate accounts for the business’s assets, liabilities, capital, income, and expenses
What are financial documents?
• Records information about individual transactions
Business transactions:
• Sales, purchases, cash payments and receipts
Corresponding documents:
• Sales invoice, purchase invoices, cheque stubs and remittance advice
What are business transactions?
• Business’s day-to-day activities that have monetary value
• All business transactions must be recorded in the accounting system with sufficient detail to enable the correct categorization of the transaction for the purpose of preparing financial statements
What are the Statement of Financial Position?
• Which is owned by the business & what is owed by the business at that point in time
• The above information is conveyed on the statement of financial position by grouping and summarizing the balances from the trial balance, of all the asset accounts, all the liabilities accounts and all the capital accounts
What is an asset?
What a business owns.
