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POA Flashcards

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1
Q

what does a trading business do?

A

buys from supplier, sell goods to others

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2
Q

examples of trading business

A

bookshop, supermarket

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3
Q

what does a service business do

A

provides service to customers

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4
Q

examples of service business

A

gym, cinema, dental, message parlour, clinic, tuition centre

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5
Q

what are the different forms business ownership

A

sole proprietorship, limited liability partnership, private limited company

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6
Q

cons of sole proprietorship

A

harder to get a bank loan, personally responsible for any losses or debts, funding mainly comes from owner

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7
Q

pros of sole proprietorship

A

easy to set up, minimal administrative duties, full control of business

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8
Q

pros of limited liability partnership

A

easy to get a bank loan, larger access to funds, partners are not personally responsible for debts or losses

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9
Q

cons of limited liability partnership

A

more procedures and formalities to follow, control is shared among partners

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10
Q

who are stakeholders

A

people interested in the business, make use of info to make informed decisions

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11
Q

who devises strategic plans to run the business

A

manager

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12
Q

who sell similar goods and provide similar services, need to know whether i am comparable to the biz and how to improve on performace

A

competitors

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13
Q

who contribute capital to the biz. need to decide whether to invest or sell the biz.

A

owner

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14
Q

who enforce tax regulations and decide amount of tax to collect from biz

A

government

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15
Q

who buys goods and services from the biz and decides whether to continue buying from biz.

A

customer

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16
Q

who work for biz, decide whether to continue working at the biz

A

employees

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17
Q

Who lends money to the biz, expecting interest in return. I need to know whether to grant loans to the biz.

A

lender

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18
Q

Who supplies goods/services to the biz. I need to decide whether to sell to the biz on credit

A

supplier

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19
Q

what is the role of the accountant

A

provides accounting and non accounting information for stakeholders to make informed decisions on the management of resources and the performance of biz

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20
Q

what are the roles of an accountant

A
  • set up the accounting information system to provide accounting information for decision making
  • act as stewards of the biz, by managing resources of the biz on behalf of the owner
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21
Q

what are the professional ethics of accountants

A

having integrity and being objective

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22
Q

how does an accountant have integrity

A

an accountant with integrity is being straightforward and honest in all professional relationships

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23
Q

how does an accountant be objective

A
  • will not let bias, conflict of interest or the undue influence of others override his/her professional judgement
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24
Q

what are the accounting theories

A
  • accounting entity
  • going concern
  • accounting period
  • monetary
  • objectivity
  • historical cost
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25
what is accounting entity
accounting entity states that the activities of the biz is seperate from the actions of the owner.
26
what is going concern
going concern states the biz is assumed to have indefinite economic life unless there is credible evidence that it may close down
27
what is accounting period
states that the life of the business is divided into regular time intervals
28
what is monetary
only business transactions can be measured in monetary terms like dollars and cents
29
what is objectivity
accounting information must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases
30
what is historical cost
transactions should be recorded at their original cost
31
define assets
assets are resources a business owns & contracts that are expected to provide future benefits
32
define liability
obligations owed by a business to others that are expected to be settled in the future
33
define equity
claim by the owner on the net assets of a business
34
all examples of assets
cash in hand, cash at bank, property, inventory, motor vehicles, fixtures and fittings, office equipment, trade receivables
35
all examples of liability
bank loan, bank overdraft, mortgage loan, loan from (lender) , trade payables
36
all examples of equity
capital, profit and equity
37
whats the basic accounting equation
A = L + Eq
38
whats the expanded accounting equation
A = L + Capital + (income - expense ) - drawings
39
define profit
when a business starts operations, it will generate income and incur expenses, resulting in either a profit or loss
40
define income
income refers to amounts earned through the activities of a business
41
examples of income
sales revenue, service fee revenue, rental income, commission income, interest income, discount received
42
define expense
expenses refers to the cost incurred to earn income in the same accounting period
43
examples of expense
cost of sales, interest on loan, rent expense, wages/salaries, insurance expense, advertising expense, utilities expense, maintenance/repairs, stationery expense, discount allowed
44
What is a trial balance?
The trial balance is a list of all the ledger accounts and their ending balances at a point in time
45
Purpose of trial balance?
1. Ensure arithmetic accuracy in recording: 2. Facilitate the preparation of financial statements.
46
Limitations of the trial balance
A balanced trial balance is not absolute proof of accuracy. There may be errors NOT revealed by the trial balance.
47
State and explain the accounting cycle
Stage 1 - identify and record: source document are used to record transactions in the journal and the journal entries are posted to the ledger Stage 2 - Adjust : The ending balances of ledger accounts are listed in a trial balance. Any adjusting entries are recorded in the journal and posted to the ledger. Accounts are adjusted at least once in a financial year Stage 3 - Report : Based on the adjusted trial balance, the financial statements are prepared. Reports are prepared at least once in a financial year Stage 4 - After the financial statements are finalised, income, expenses, income summary, drawings and dividends accounts are closed by first passing journal entries before being posted to the ledger. Accounts are closed once at the end of the financial year.
48
State and explain the accounting information system
Source document > journal > ledger > trial balance > financial performance and statements Accounting information system is a system that a business uses to collect, store and process accounting data.
49
Explain source documents and its importance.
A source document provides evidence to capture occurrence of a transaction. This is in accordance with the objectivity theory which states that accounting information recorded must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and bias.
50
Credit purchases and sales
invoice
51
Overcharges and returns of goods
credit note
52
undercharges
debit note
53
Cash purchases and sales
receipt
54
receipt of money
receipt
55
payment of money
payment voucher
56
trade discount
Definition: Trade discount is a reduction to the list price of goods. Purpose: It is given to encourage customers to buy in bulk It is also used to encourage their loyalty and patronage
57
Cash discount
Definition: Cash discount is a reduction to the invoice price Purpose: It is given to encourage customers to pay early
58
Informs credit customers of the amount owed after a credit sales
invoice
59
Increase the amount owed by credit customers who were previously undercharged
debit note
60
Reduces the amount owed by credit customers who were previously overcharged, or after goods were returned
credit note
61
Acknowledges payment received from customers
receipt
62
Issued by credit customer to inform which invoice they are making payment for
remittance advice
63
processes payment to credit supplier
payment voucher
64
Checks and tallies against the business records of tits cash at bank account
bank statement

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