Outcome 2 Flashcards
(24 cards)
What is verifiability
Source documents that can act as evidence of a businesses finances that can be checked by an independent knowledge observer through auditing
What is understandability
Requires financial information in reports to be presented clearly and concisely so that users with reasonable knowledge of business and economic activities can comprehend.
What are the stages of the accounting process
Source documents, records, reports and advice
What is the entity assumption
Ensures that the records of assets, liabilities and business activities of the entity are kept completely seperate from those those of the owner of entity .
Define current assets
Present economic resource of the entity with the potential to be converted to cash, sold, or consumed within the next 12 months of the reporting period
Define current liabilities
Present obligation of the entity to transfer an economic resource as a result of a past event that are reasonably expected to be settled within 12 months of the end of the reporting period.
Define cash flows from operating activities
Cash inflows and outflows related to day-to-day trading activites
Define cash flows from investing activities
Cash inflows and outflows related to buying and selling of non-current assets
Define cash flows from financing activities
Cash inflows and outflows related to the financial structure of the business
Define liquidity
The ease with which you can convert an asset to cash, without affecting its market value
Define cash flow cover
A liquidity indicator that asses the ability of the firms operating cash flows to meet its short term term debts as they fall due
How to figure out formula for cash flow cover
Net cash flows from operating activities divided by current liabilities
How to calculate the total GST
GST settlement should cancel out GST payable from previous month. Then do Gst receivable minus GST payable. Then whatever payable or receivable is higher it becomes the opposite.
How to calculate including GST
divide the amount 11
How to calculate plus GST
multiply by 10%
What not to include in cash journals
Invoice, credit, memos
what is a cheque
A cheque is a written order instructing a bank to pay a specific sum of money to a named payee or to the bearer of the cheque.
what is a cheque butt
A cheque butt is the part of a cheque book where you record information about the payment being made, such as the date, payee’s name, and the purpose of the cheque.
what is a receipt
a document, either physical or digital, that confirms a payment has been made.
what is a EFT
EFT stands for Electronic Funds Transfer, which refers to any financial transaction that transfers money electronically between accounts without using physical cash or checks.
what is a invoice
an invoice is a formal, legally binding document issued by a seller to a buyer, requesting payment for goods or services provided.
what is a bank statement
a detailed record of all transactions, including deposits, withdrawals, and fees, that have occurred in a bank account over a specific period, typically a month.
what is the nature of cash and credit transactions
cash transactions involve the immediate exchange of money (cash, debit card, etc.) for goods or services, with payment occurring at the time of purchase. Credit transactions, on the other hand, are deferred payment arrangements where goods or services are received first, and payment is made later.
what is a memo
a written communication tool used to convey information about financial matters.
