1A

Question 1

DEFINITION OF ACCOUNTING

Answer 1

• systematically recording
• classifying, summarising, measuring financial transaction
• interpreting the results
• communicating the info to the management

Question 2

ECONOMIC EVENT WITH THIRD PARTY

Answer 2

• recorded in an organisation’s accounting system
• measured in money

Question 3

SOURCE DOCUMENT

Answer 3

-original record documents produced with each business events and used to record every business transaction
- contain details that supports or subtantiates a transaction that will be (or has been) entered in an accounting system

Question 4

EXAMPLES OF SOURCE DOCUMENT

Answer 4

• sales receipts
• bank cheque or statements
• purchase orders
• vendors invoices
• company own invoices
• employee’s time cards
• a company’s receiving reports that supports the vendors’ invoices

Question 5

ACCOUNTING CYCLE

Answer 5

1) record them as journal entries
2) post the journal entries to ledger or T accounts
3) unadjusted trial balance
4) make end of period adjusting journal entries
5) adjusting journal entries and prepare the adjusted trial balance
6) record reversing entries
7) post-closing trial balance for the next accounting period
8) closing entries
9) prepare financial statement

Question 6

FIVE ACCOUNT TYPES

Answer 6

• assets
• liabilities
• capital (equity)
• revenue / income
• expenses / costs

Question 7

ASSETS

Answer 7

resources owned by a company and have future economic value
current assets
fixed assets

Question 8

CURRENT ASSETS

Answer 8

• used up in less than one year
• used in a firm day to day operations
  examples;
• inventory / stock
• accounts receivable
• bank (money)
• cash in hand
• investments
• loans to others

Question 9

FIXED ASSETS

Answer 9

• physical assets
• useful life more than one year
  examples;
• land
• plant / buildings
• machinery
• motor vehicles
• office equipments
• furniture
• fittings

Question 10

LIABILITIES

Answer 10

• trade / accounts payable goods or expense
• loans to the firms and bank overdraft

Question 11

CURRENT LIABILITIES

Answer 11

short term
need to be paid within one year etc

Question 12

LONG TERM LIABILITIES

Answer 12

no need to pay within one year

Question 13

CAPITAL

Answer 13

• owners equity
• total amount of financial resources aka money invested in a business by an owner (or shareholders) used to leverage growth

Question 14

REVENUE

Answer 14

• sales / turnover
• income that a business receives from its normal business activities
  a) sales of goods and services
  b) interest earned
  c) royalties earned
  d) other fees (eg tickets) earned

Question 15

EXPENSE (COST)

Answer 15

the money spent or cost incurred in firm efforts to generate revenue

Question 16

EXAMPLES OF EXPENSES

Answer 16

• admin
• delivery and others
• rent
• salaries
• sales commissions expense
• advertising, marketing and promotions

Question 17

PHYSICAL RESOURCES

Answer 17

raw materials
building / office / retail space
vehicles
storage
facilites
machinery
factory / plant
vessel

Question 18

HUMAN RESOURCES

Answer 18

staff

Question 19

resource supplied by the owner

Answer 19

capital

Question 20

resources in the business =

Answer 20

resources supplied by the owner

Question 21

assets =

Answer 21

capital

Question 22

capital + liabilities =

Answer 22

assets

Question 23

liabilities + owner equity =

Answer 23

assets

Question 24

debit the receiver
credit the giver

Answer 24

• personal accounts

Question 25

debit what comes credit what goes out

Answer 25

- real accounts - debit balance by default - debit what comes in = adding to the existing account balance - credit what goes out = reducing the account balance

Question 26

debit all expenses and losses

Answer 26

decrease the capital

Question 27

credit all incomes and gains

Answer 27

increase the capital

Question 28

capital of the company is a liability

Answer 28

= default credit balance

Question 29

Three major financial statement

Answer 29

profit and loss - info about a company's profit and loss balance sheet - gives the business a clear picture on its financial position of on a particular date like end of year / month cash flow statements - reports the cash generated and spent during a specific period of time (month/daily)

Question 30

drawings accounts

Answer 30

credit cash account debit drawing account it is a contra equity accounts and is reported as a reduction from total equity

Question 31

revenue accounts

Answer 31

revenue are credits as owner's equity or stockholders' equity increase debit asset account eg accounts receivable or cash credit revenue account

Question 32

expenses accounts

Answer 32

owner equity decrease debit expense account credit asset account eg cash

Question 33

journal

Answer 33

record of financial transactions in order by date book of original entry process of recording a business transactions in the accounting records (applies to the double entry bookkeeping system)

Question 34

ledger / t- accounts

Answer 34

book containing accounts in which the classified and summarised information from the journals is posted as debits and credits

Question 35

debit side

Answer 35

left

Question 36

credit side

Answer 36

right

Question 37

posting

Answer 37

transfer the total balance in a sub-ledger into the general ledger

Question 38

five steps of posting from journal to ledger

Answer 38

1) typing the accounts name and number 2) specify the details of the journal entry 3) put down the debits and credits for the transactions 4) calculate the debit and credit balance 5) correct any errors

Question 39

trial balance

Answer 39

credit = debit

Question 40

invoice

Answer 40

payment request sent by the supplier it is important as they record sales transactions seller = sales invoice buyer = vendor invoice