stuff Flashcards
(22 cards)
Define the term ‘Drawings’
Drawings - owner withdrew assets from the business for his own use.
Revenue recognition theory.
Revenue is recognised when goods are delivered to customers.
What is the accounting equation?
Assets = Liabilities + Equity
Difference between trading and service business?
A trading business buys goods from suppliers and sell goods to customers, whereas a service business provides service to its customers.
What are the stages of the accounting cycle?
1) Identify and record
2) Adjust
3) Report
4) Close
What are the three types of stakeholders who would be interested in the accounting information of a business?
1) Owner and shareholders
2) Employee, Managers, Customer, Competitors
3) Government, Competitors, Lenders, Suppliers
What kind of accounting information systems are there?
1) Source Documents
2) Journal
3) Ledgers
4) Trial balance
5) Financial Statements
Why should Owners and stakeholders be interested in the businesses financial statements?
Owners and shareholders decide whether to continue to invest
in the business or to sell the business.
Why should Managers be interested in the businesses financial statements
Managers decide on ways to improve the performance of the
business.
Why should lenders be interested in the businesses financial statements?
Lenders decide whether to grant loans to business or not.
Suppliers..
Suppliers decide whether to sell to the business on credit or
not.
the government…
Government decides whether business has complied with tax regulations and decides on the amount of tax to collect
Employees.
Employees
Employees decide whether to continue working at the
business or not.
Customers
Customers decide whether to buy from the business or not depending on whether the business can continue to provide the goods/service and after-sales service in the future.
Difference between bank loan and bank overdraft?
Bank loan is presented as long-term borrowings in non-current liabilities section in the statement of financial position.
Bank overdraft is presented in current liabilities section in the statement of financial position.
Under what accounting element does cost of sales belong to?
Expense
Under what accounting element does Prepaid ____ belong to?
Assets
What accounting element does Impairment loss on inventory belong to?
Expense
What is the role of accounting?
Accounting is an information system that provides accounting information for stakeholders to make informed decisions [1] regarding the management of resources and performance of businesses.
Why does an account have to have integrity
Integrity [1] - being straightforward and honest in all professional and business relationships.
State one feature sole proprietorship
Owned by one person who contributes capital to set up.
what is monetary theory?
Only business transactions that can be measured in monetary terms are recorded.
