module 1 Flashcards
(88 cards)
1
Q
It looks like you’re asking about a broad range of accounting concepts. I’ll break down each point to give you a clearer understanding:
A
2
Q
A
3
Q
A
4
Q
Fictitious assets are non-physical assets
A
which do not have any real value
5
Q
A
6
Q
A
7
Q
A contingent asset is an asset that may arise from past events but its existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events. For example
A
a lawsuit that might result in a financial settlement. Under accounting standards
8
Q
A
9
Q
A
10
Q
A contingent liability is a potential obligation that may arise depending on the outcome of a future event. For example
A
if a company is involved in a lawsuit
11
Q
A
12
Q
A
13
Q
The accounting process includes:
A
14
Q
- Identifying financial transactions
A
15
Q
- Recording transactions in journals
A
16
Q
- Classifying transactions in ledgers
A
17
Q
- Summarizing information in trial balance
A
18
Q
- Preparing financial statements (Profit & Loss Account
A
Balance Sheet
19
Q
- Interpreting financial results
A
20
Q
A
21
Q
A
22
Q
The basic accounting equation is:
A
23
Q
Assets = Liabilities + Capital
A
24
Q
This equation represents the relationship between a company’s resources (assets)
A
its debts (liabilities)
25
26
### 6. **Classification of Capital**:
27
- **Owner's capital**: Funds invested by the owner in the business.
28
- **Share capital**: Funds raised by issuing shares in a company.
29
- **Debt capital**: Funds raised through loans or debt instruments.
30
31
### 7. **Revenue vs. Expenditure**:
32
- **Revenue**: Income generated from normal business operations (e.g.
sales revenue
33
- **Expenditure**: Money spent or costs incurred by a business (e.g.
rent
34
35
### 8. **Income and Expenditure Accounting Concepts**:
36
- **Income**: Economic benefits realized by an entity in the form of inflows of cash or receivables.
37
- **Expenditure**: Outflows of resources used for expenses or costs of earning income.
38
39
### 9. **Accounting Taxonomy**:
40
**Accounting taxonomy** is a system of classification used to organize and categorize accounting terms and elements
enabling standardized reporting and analysis. It is often used in financial statement preparation and is closely related to **XBRL (eXtensible Business Reporting Language)**.
41
42
### 10. **Types of Business Organizations**:
43
- **Sole Proprietorship**: A business owned and run by one person.
44
- **Partnership**: A business owned by two or more persons.
45
- **Corporation**: A legal entity separate from its owners
with shareholders.
46
- **Limited Liability Company (LLC)**: A hybrid between a corporation and partnership offering limited liability protection.
47
48
### 11. **Branches of Accounting**:
49
- **Financial Accounting**: Focuses on preparing financial statements for external users (investors
creditors).
50
- **Management Accounting**: Provides information to internal users (managers) for decision-making.
51
- **Cost Accounting**: Analyzes the costs of producing goods or services.
52
- **Tax Accounting**: Deals with preparing tax returns and planning tax strategies.
53
- **Auditing**: Examines and verifies the financial records of a company.
54
55
### 12. **Accounting Standards**:
56
- **India**: Governed by **Indian Accounting Standards (Ind AS)**
which are aligned with **International Financial Reporting Standards (IFRS)**.
57
- **International**: Governed by **International Financial Reporting Standards (IFRS)**
set by the **International Accounting Standards Board (IASB)**.
58
59
### 13. **Qualitative Aspects of Financial Accounting**:
60
Key qualitative characteristics of financial accounting include:
61
- **Relevance**: Information should be capable of influencing decisions.
62
- **Faithful Representation**: Information must be complete
neutral
63
- **Comparability**: Users should be able to compare financial statements across periods or entities.
64
- **Verifiability**: Information should be supported by evidence
such as receipts or contracts.
65
- **Timeliness**: Information should be available to decision-makers in time.
66
- **Understandability**: Information should be clear and easily understood by users.
67
68
### 14. **Stakeholders Using Accounting Information**:
69
Key stakeholders who use accounting information include:
70
- **Investors and Shareholders**: To assess profitability and investment potential.
71
- **Management**: To make operational and strategic decisions.
72
- **Creditors**: To assess the creditworthiness of the business.
73
- **Employees**: For job security and financial health of the company.
74
- **Government**: For tax assessments and regulatory compliance.
75
- **Analysts**: To evaluate company performance for recommendations.
76
77
### 15. **Need for Accounting**:
78
Accounting is necessary to:
79
- Provide accurate financial information for decision-making.
80
- Track business performance and financial position.
81
- Ensure legal and regulatory compliance.
82
- Facilitate tax calculation and filing.
83
- Ensure transparency and accountability to stakeholders.
84
85
### 16. **Meaning of Accounting**:
86
Accounting is the process of systematically recording
measuring
87
88
This covers the main concepts you mentioned. Let me know if you'd like further clarification on any specific topic!
