1 - Double-entry Bookkeeping

Question 1

The dual effect principle

Answer 1

Every transaction that a business undertakes has two equal & opposite effects

Question 2

The separate entity concept

Answer 2

The business is a completely separate accounting entity from the owner

Question 3

The accounting equation

Answer 3

Assets - Liabilities = Capital
Assets - Liabilities = Capital + Profit - Drawings

Question 4

Non-current assets

Answer 4

Assets that will be used within the business over a long period (usually greater than one year)

Question 5

Current assets

Answer 5

Assets that are expected to be used or sold within the business in the normal course of trading (usually a period less than one year)

Question 6

Non-current liabilities

Answer 6

Payables that will be paid over a long period, typically in excess of one year

Question 7

Current liabilities

Answer 7

Short-term payables of a business, typically due to be paid within 12 months

Question 8

Capital/equity

Answer 8

The ‘residual interest’ in a business & represents what is left when the business is wound up, all the assets sold & all the outstanding liabilities paid. It is effectively what would be repaid to the owners if the business ceased to trade