Acc cycle

Question 1

Define an entity

Answer 1

Any business that conducts operations and is involved in trading

It can sell goods or render services with or without the objective of making a profit

Question 2

Name the most general forms of entities

Answer 2

-Sole proprietor
-Partnership
-Close corporation
-Companies

Question 3

Define sole proprietor

Answer 3

Does not have to comply with strict laws and regulations stipulating how the accounting records of the business should be kept and the financial statements prepared.
The owners and the entity are not separate legal parties.

Question 4

Define partnership

Answer 4

Similar to a sole proprietor, except for having more than one owner and the fact that they share profits and losses in a specific ratio

Question 5

Define close corporation

Answer 5

Regulated by the act on Close Corporations.
A close corporation has members and profits are distributed to the members as a profit distribution.

Question 6

Define companies

Answer 6

A company has strict regulations on how its financial statements should be prepared in terms of the Companies Act. In terms of legislation, some companies should be audited annually, which means that an external auditor must report whether the financial statements of the company is a reliable representation of the financial operations of the entity during the financial period.

Question 7

What is financial accounting’s main objective?

Answer 7

To report on operations of entities in such a way that the parties involved have the information they need to make decisions.

Question 8

Name the 4 steps of the accounting cycle

Answer 8

1. Recording of transactions and processing of documentation
2. Correcting of errors
3. Complying with accounting principles
4. Preparation of financial statements