W3

Question 1

GAAP principle that is about GAAP being followed thoroughly

Answer 1

Consistency

Question 2

Raw facts, no personal biases or judgment

Answer 2

Objectivity

Question 3

Only recording those of material value, no negligible transactions (tea, pens, etc.)

Answer 3

Materiality

Question 4

Revenues and expenses have to be matched in the same year or period

Answer 4

Matching

Question 5

Recording sales or expenses whenever they happen, rather than earned or received

Answer 5

Accruals

Question 6

Only record FINANCIAL transactions, not non-financial/monetary transactions

Answer 6

Money measurement

Question 7

Every transaction has 2 effects

Answer 7

Dual aspect

Question 8

An accounting term for the assumption that business will go on forever (until evidence proves contrary)

Answer 8

Going concern

Question 9

The income statement covers the REEITDN. What’s the REEITDN?

Answer 9

Revenue, expenses, EBIT, interest, taxes, dividend, net profit

Question 10

Other name for statement of profit or loss

Answer 10

Income statement

Question 11

What does the cash flow statement check?

Answer 11

The generation/amount and source of cash

Question 12

What does the balance sheet check?

Answer 12

The size of a company

Question 13

What does the income statement check?

Answer 13

The profitability of a business

Question 14

The GAAP concept of not changing the cost of an asset despite changes to its market value

Answer 14

Historical cost

Question 15

When you’ve registered the value of an asset and its market value changes, should you change your financial statement?

Answer 15

No, this is why relevance and reliability can sometimes conflict

Question 16

Quality of being able to be compared with an organization’s historical financial statements or its competitors’

Answer 16

Comparability

Question 17

Principle/quality that showcases thorough adherence to the GAAP

Answer 17

understandability

Question 18

Qualitative characteristic that only contains the useful, helpful information

Answer 18

Relevance

Question 19

The 4 accounting qualitative characteristics

Answer 19

Relevance, reliability, comparability, and understandability

Question 20

The concept of overestimating risk and underestimating profit

Answer 20

Prudence

Question 21

The differences of financial accounting and management accounting

Answer 21

Financial accounting is PAFEG, (past-oriented, for external users, must be GAAP-adhering) meanwhile management accounting is FFING (future-oriented, for internal users, and does not require adherence to GAAP)

Question 22

Accounting equation

Answer 22

Assets = capital + liabilities

Question 23

When a third party is legally obligated to check a business’ financial records

Answer 23

audit

Question 24

are the amounts owed to suppliers of the business who, having supplied goods or services on credit, have not yet been paid by the business

Answer 24

trade payables

Question 25

are the amounts owed by the customers, who having been sold goods or services to, have not yet paid the business

Answer 25

trade receivables

Question 26

recording revenues when earned and not when received, recording expenses when incurred and not when they are paid

Answer 26

accruals

Question 27

files recording and totaling monetary double entry records

Answer 27

ledgers

Question 28

Credits side on a trial balance

Answer 28

Liabilities, income, and capital

Question 29

Debits side on a trial balance

Answer 29

Assets, expenses, and drawings

Question 30

Recording daily transactions

Answer 30

Book-keeping

Question 31

The 3 stages of double entry book-keeping

Answer 31

Transactions > Books of balance > Trial balance

Question 32

Why must a financial statement be comparable?

Answer 32

To assess if a business has become profitable compared to the past and its competitors

Question 33

Conceptual framework in accounting

Answer 33

Accounting conventions (GAAP)

Question 34

Regulatory framework in accounting

Answer 34

Accounting standards

Question 35

Legal framework in accounting

Answer 35

Company law

Question 36

When the business owner and the business itself are considered as 2 separate entities

Answer 36

Business entity

Question 37

Assets which cannot be turned into cash quickly (e.g: land)

Answer 37

Non-current assets

Question 38

Assets which can be turned into cash quickly

Answer 38

Current assets

Question 39

Only listed companies can issue ____________.

Answer 39

shared capital

Question 40

Sum amount of money paid to the shareholders from profits

Answer 40

dividend

Question 41

Capital structure of a firm

Answer 41

Shared capital and loans (long-term debt)

Question 42

Funds focus more on ______ and ______ __________.

Answer 42

Loans and shared capital

Question 43

Funds =/= ...

Answer 43

Profits

Question 44

Profits =/= ....

Answer 44

Income

Question 45

future-oriented, focuses on how business funds and select appropriate investments

Answer 45

Finance

Question 46

Past-oriented, recording past entries

Answer 46

accounting

Question 47

The meaning of "GAAP"

Answer 47

Generally Accepted Accounting Principles

Question 48

The 3 goals/purposes of financial statements

Answer 48

Inform an organization of its financial position, financial performance, and cash flows to assist its users in making economic decisions; Provide insight into an organization's current financial status on how it's been meeting financial goals and its ability to make future cash payments; Assess the stewardship/accountability of management in regards to the resources entrusted to them

Question 49

Components of financial statements (5)

Answer 49

Statement of financial position, statement of profit or loss, statement of changes in equity, statement of cash flow, and a set of notes to the accounts which explains the numbers in the accounts

Question 50

Amount incurred by the business to operate on a day-to-day basis

Answer 50

Expenses

Question 51

The amount earned by the business

Answer 51

Income

Question 52

The amount of money that the owner puts into the business

Answer 52

Capital

Question 53

An amount owed by the business

Answer 53

Liabilities

Question 54

Items controlled by the business

Answer 54

Assets

Question 55

The production of financial statements for the use of the external users in decision-making

Answer 55

financial accounting

Question 56

Financial accounting

Answer 56

the production of financial statements for the use of the external users in decision-making

Question 57

Shares are unavailable for purchase, and owned by a small group of investors

Answer 57

private company

Question 58

A listed company, one that has made its shares available for purchase through stock exchange

Answer 58

Public company

Question 59

2 or more individuals owning a business

Answer 59

Partnership

Question 60

An individual that runs and is wholly responsible for their business

Answer 60

Sole trader

Question 61

2 areas of accounting

Answer 61

Financial accounting and management accounting

Question 62

Accounting and Finance evaluate the ______ and __________ of each form of finance and the _________ and ____________ of each forms of investment.

Answer 62

costs, benefits; risks, returns

Question 63

Accounting and Finance assist in these 3 activities

Answer 63

Planning, decision-making, and controlling

Question 64

Outflows > Inflows

Answer 64

Negative cash flow

Question 65

Positive cash flow

Answer 65

Inflows > outflows

Question 66

The movement of money in and out of a company

Answer 66

Cash flow

Question 67

how well a business can make use of its assets and generate revenue from its main mode of business

Answer 67

Financial performance

Question 68

presents balances of a company's assets, liabilities, and equity

Answer 68

Statement of financial position (Balance sheet)

Question 69

Relevance of accounting and finance

Answer 69

In how they provide information about an organization's financial position, performance, and its cash flow

Question 70

Are both concerned with the financial aspects of decision-making, closely related, and overlap each other considerably

Answer 70

Accounting and Finance

Question 71

Internal users and external users

Answer 71

Managers, employees; creditors, investors, and regulators

Question 72

Through what medium does accounting communicate information?

Answer 72

Financial statements

Question 73

What details does a source document contain?

Answer 73

Name of parties, amount paid, substance of transaction, and a unique number for identification in the accounting system.

Question 74

An original document containing the details of a business transaction

Answer 74

Source document

Question 75

What is accounting?

Answer 75

The process of identifying and measuring source documents, recording, classifying, and summarizing accounting books/records, and communicating information through financial statements to help managers make informed decisions and judgments