1. Introdction to Accounting Flashcards
What is the definition of accounting?
The act of recording and summarizing financial information.
What is an alternate name for the Statement of Financial Position?
The Balance Sheet.
What are the two main financial statements?
The Statement of Financial Position and Statement of Profit or Loss.
What are the three main types of business entities?
-Sole Trader
-Limited Liability Company
-Partnerships
What is a sole trader?
One person in business on their own.
What does limited liability mean?
The owners don’t have liability for the debts of the company.
What does unlimited liability mean?
The owners have liability for the debts of the company.
What is a partnership?
Like a sole trader but with two or more owners.
What are the seven main users of accounting information?
-Management
-Owners/shareholders
-Potential investors
-Lenders
-Employees
-Government
-Public
What is management accounting?
Statements, usually prepared monthly, to help managers run the business.
Only used internally.
No rules for their preparation or layout.
What is Financial Accounting?
Statements, required by law, to be prepared yearly.
External reporting (publicly available).
The layout is also required by law.
