Lesson 1 Nature and Purpose of Accounting

Question 1

What is Market Share?

Answer 1

Market Share is the percentage of sales that one business has compared to its competitors in the same industry.

Question 2

Accounting

Answer 2

Accounting is the management of information system that involves the collecting, sorting, classifying and recording of financial information to assist business owners in decision making.

Question 3

Financial Data

Answer 3

Financial data is the facts and figures that financial information is based, for examples, a purchase of a ticket from Melbourne to Sydney on Quantas for $200 financial data

Question 4

Non-financial Information

Answer 4

Any information that can't be found in financial statements and is not expressed in dollars and cents or reliant on dollars and cents in calculations
Examples
Customer Satisfaction
Employee Absentee
Safety Concerns

Question 5

Source Documents

Answer 5

Documents provide evidence that a transaction has occurred and the details of the transaction itself.

Question 6

Ethical Considerations

Answer 6

Social
Environmental
Accountants are required to maintain integrity, objectivity, and confidentiality

Question 7

What is the order of the Accounting Process

Answer 7

Source documents -> Records -> Reports -> Advice ->

Question 8

Records

Answer 8

Recording: Sorting, classifying, and summarizing the data contained in the source documents so that it is more useable

Question 9

Reports

Answer 9

Preparation of financial statements that communicates financial information to the owner

Question 10

Advice

Answer 10

Provision to the owners of a range of options available to their aims/objectives together with recommendations as to the suitability of those aims.

Question 11

Accounting process

Answer 11

Process of converting Financial data into financial information in order to make decisions

Question 12

Balance sheet

Answer 12

An accounting report that details a firm’s financial position at a particular point in time by reporting it assets, liabilities and owners equity

Question 13

Impact of transactions on the accounting equation

Answer 13

When a transaction occurs, this changes “financial position” of the business by making adjustments to items in the assets and/or liabilities and/or equity.

Question 14

What are the 2 things that must remain true

Answer 14

Every transaction will affect at least 2 items in the accounting equation
After recording these changes, the accounting equation still balances.