loc Flashcards
(19 cards)
What is the purpose of accounting?
Provides information for decision-making.
Prepares financial reports on a firm’s performance.
What are the five purposes of accounting?
Recording Transactions
Management of the Business
Compliance
Measuring Performance
Control
Why is recording transactions important?
Tracks income and expenses.
Helps ensure correct tax payments.
How does accounting support management of a business?
Aids in planning, monitoring, and controlling.
Helps manage staff, stock, and budgets.
What does compliance mean in accounting?
Following financial laws and regulations.
Prevents fraud and ensures accurate reporting.
How does accounting help measure performance?
Tracks sales revenue, gross profit, and net profit.
Identifies whether the business is making a profit or loss.
What is the role of accounting in control?
Helps manage trade receivables and payables.
Prevents fraud by monitoring unusual transactions.
What are the sources of capital income?
Loans
Mortgages
Shares
Owner’s Capital
Debentures
What are the two main types of income?
Capital Income
Revenue Income
What is capital income?
Money invested in the business by owners or investors.
Used for long-term assets like property or equipment.
What are the types of capital income?
shares
mortgages
shares
owner capital
debentures
What is revenue income?
Money earned through the business’s day-to-day operations.
What are the types of revenue income
sales
rent received
commission received
discount received
interest received
What is expenditure?
Money the business spends, categorized as capital or revenue.
What is capital expenditure?
Spending on long-term assets like property, vehicles, or equipment.
What are examples of intangible assets?
Patents
Trademarks
Goodwill
Brand recognition
Intellectual property
What is revenue expenditure?
Day-to-day expenses like salaries, rent, and utilities.
What are examples of revenue expenditure?
Inventory, rent, rates, utilities, wages, and marketing.
What is depreciation, and why does it matter?
The reduction in value of an asset over time.
Impacts financial reporting and tax calculations.
