POA HUGEASIANKID

Question 1

Explaining accounting entity

Answer 1

Business activities is SEPARATE
from the owner’s actions.
All transactions recorded from
BUSINESS VIEWPOINT.

Question 2

Explain objectivity theory

Answer 2

Accounting information recorded must
have RELIABLE and VERIFIABLE
EVIDENCE.

Question 3

Explain Prudence theory

Answer 3

Choose accounting treatment that
LEAST OVERSTATE ASSETS AND
PROFITS and
LEAST UNDERSTATE LIABILITIES
AND LOSSES

Question 4

Explain accrual basis of accounting

Answer 4

Activities that have OCCURRED,
REGARDLESS WHETHER CASH IS
PAID OR RECEIVED, should be
RECORDED IN THE RELEVANT
ACCOUNTING PERIOD

Question 5

Explain revenue recognition theory

Answer 5

Revenue is EARNED when GOODS
ARE DELIVERED or SERVICES
PROVIDED

Question 6

Explain matching theory

Answer 6

EXPENSES INCURRED must be
MATCHED against INCOME
EARNED in the SAME PERIOD.

Question 7

Explain materiality theory

Answer 7

Report relevant information if LIKELY
TO MAKE A DIFFERENCE TO THE
DECISION-MAKING process

Question 8

What is the accounting equation?

Answer 8

Assets= Liabilities + Equity

Question 9

Define trade discounts

Answer 9

Reduction to LIST PRICE

Question 10

Define cash discounts

Answer 10

Reduction to invoiced price

Question 11

Why are trade discounts given?

Answer 11

To encourage customers to buy more/patron/be loyal to business

Question 12

Why are cash discounts given?

Answer 12

To encourage credit customers to pay EARLIER, within a specific time

Question 13

Trial balance is prepared to…?

Answer 13

1. help in preparing financial statements
2. ensure arithmetic accuracy in recording

Question 14

Define income

Answer 14

Amount EARNED through business activities

Question 15

Define expenses

Answer 15

Costs incurred in business operation to earn income in the same accounting period

Question 16

Give 2 factors for sole proprietorship

Answer 16

1. owner has FULL control of business
2. MINIMAL administrative duties

Question 17

Give 2 stakeholders and decisions made from them

Answer 17

1. Manager. Whether to find ways to improve business
2. Employee. Whether to continue working at business

Question 18

What is the role of accounting?

Answer 18

Accounting is an INFORMATION SYSTEM.

The system provides accounting information so that STAKEHOLDERS can MAKE INFORMED DECISIONS related to the
business

Question 19

What is the role of an accountant?

Answer 19

1. The accountant prepares and provides accounting information so that stakeholders can make decisions.
2. Accountants must have integrity and be objective.

Question 20

Why is it important for accountants to have professional ethnics?

Answer 20

So that the information provided by the accountant is
RELIABLE AND CAN BE TRUSTED by the
stakeholders

Question 21

Explain going concern.

Answer 21

Business is assumed to have
INDEFINITE ECONOMIC LIFE,
unless there is credible evidence it
may close down.

Question 22

Explain consistency.

Answer 22

Once an accounting method is
chosen, this method should be
applied to ALL FUTURE
ACCOUNTING PERIODS so that
MEANINGFUL COMPARISON can be
made

Question 23

Explain monetary.

Answer 23

Only transactions that can be
MEASURED IN MONETARY terms
are recorded

Question 24

Explain historical cost.

Answer 24

Transactions should be recorded at
ORIGINAL COST.

Question 25

State 2 examples of accounting information

Answer 25

3 examples answer. 1.Inventory => COST of inventory 2. Non-current asset => PRICE of non-current asset 3. Trade receivables => BALANCE owed by the trade receivable

Question 26

State 2 examples of non-accounting information

Answer 26

3 examples answer. 1. Inventory => NATURE of the goods (eg easily spoilt?) 2. Non-current asset => CUSTOMERS’ REVIEWS of the non-current asset 3. Trade receivables => ECONOMIC OUTLOOK

Question 27

What is the difference between cash transaction and credit transaction?

Answer 27

Cash transaction is Payment is IMMEDIATELY during cash sale or purchase while credit transaction is Payment is POSTPONED during credit sale or purchase

Question 28

What is the accounting cycle?

Answer 28

Stage 1: Identify and record Stage 2: Adjust Stage 3: Report Stage 4: Closing

Question 29

What is the importance of Source documents?

Answer 29

Source documents are PROOF that a transaction has occurred

Question 30

Explain invoice

Answer 30

Inform customer of AMOUNT OWED after business has SOLD GOODS/ SERVICES ON CREDIT

Question 31

Explain Debit note

Answer 31

INCREASE AMOUNT OWED by credit customer who was previously UNDERcharged

Question 32

Explain Credit note

Answer 32

REDUCE AMOUNT OWED by credit customer because: 1. customer RETURNED GOODS Or 2. previously OVERcharged

Question 33

Explain remittance advice

Answer 33

Inform supplier that PAYMENT BY CHEQUE is made for a specific invoice

Question 34

Explain receipt

Answer 34

Acknowledge PAYMENT received from customer for GOODS SOLD ON CASH basis

Question 35

State the accounting equation

Answer 35

Assets= Liabilities + Equity Expanded =

Question 36

What is the difference with capital expenditure and revenue expenditure?

Answer 36

Capital is to provide benefits for MORE THAN ONE YEAR while revenue is to provide benefits which will be used WITHIN ONE YEAR

Question 37

2 differences between loan and bank overdraft?

Answer 37

1. Loan is amount borrowed is fixed while bank overdraft is amount borrowed is not fixed, but cannot exceed the limit. 2. Loan is fixed period of time for repayment while bank overdraft has no fixed period of time for repayment but this is usually settled within a year.

Question 38

State 3 reasons why a cheque would be returned by the bank as dishonored.

Answer 38

1. Cheque has expired 2. Cheque is post-dated 3. Information on cheque is not consistent

Question 39

Explain the limitation of trail balance

Answer 39

There can be errors in wrong accounts or figures recorded which are not revealed even when the trail balance is balanced.