1, intro to accounting Flashcards
what is the difference between a trading and a service business
trading deals w the sales and purchase of goods while a service business deals with the provision of services to customers
what are some professional ethics an accountant shld have
integrity
objectivity
what is the role of accounting
accounting is an information system that provides accounting information for stakeholders to make informed decisions regarding the management of resources and the performance of the business
what is the role of an accountant
to prepare and provide accounting information for decision making
why do accountants need to be ethical (2)
to not mislead users into making poor decisions
to ensure financial reports prepared contain accurate info
explain integrity
to be straightforward and honest in all professional relationships
explain objectivity
to not let bias, conflict of issue or the undue influence of others override ones professional judgement
what decisions do owners have to make
whether to continue to invest or to sell the biz
what decisions do managers have to make
ways to improve the biz
what decisions do employees have to make
whether to continue working at the biz
what decisions do lenders have to make
whether to grant loans to the biz
what decisions do suppliers have to make
whether to sell to the biz on credit
what decisions do customers have to make
whether to buy from the biz
what decisions does the government have to make
the amount of tax to collect from the biz
what decisions do competitors have to make
ways to improve their biz
how many owners does a sole proprietor biz have
1
how many owners does a llp biz have
2+
how many owners does a pte ltd biz have
<50
how are sole proprietor companies managed
the sole owner has total control
how are llp companies managed
one of the two owners will contribute most to daily operations
how are pte ltd companies managed
shareholders have no control; employees make decisions
what are the risks of sole proprietor companies
loss is bored by the sole owner
what are the risks of llp companies
loss is bored by the two owners
what are the risks of pte ltd companies
shareholders lose part/all of their investments if the company is not successful
explain the prudence concept
business should understate profits and assets of the biz, all losses are expected to be reported but not all gains are expected to be reported
explain the consistency concept
entities have to use the same accounting methods and procedures from period to period to ensure meaningful comparison over time
explain the accrual concept
all revenues and expenses needs to be taken into account for the period in which they are earned of incurred regardless whether cash is received or paid
explain the matching principle
expenses incurred in a given period must be matched against income to determine the profit or loss for the period
explain the accounting period concept
divides the life of a business into equal time periods for financial reporting
explain the going concerns concept
assumes that the business has an indefinite economic life
explain the going concerns concept
assumes that the business has an indefinite economic life
explain the objectivity concept
states that transitions are recorded based on information that is reliable and verifiable
concepts and the acronym
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prudence, consistency, accrual, matching, accountingperiod, goingconcerns, objectivity
