acc mids

Question 1

cost assumption

Answer 1

the accounting assumption that resources and services acquired by a business are recorded initially at cost as a reflection of economic value

Question 2

period assumption

Answer 2

the assumption that the life of an entity can be divided into arbitrary equal intervals for reporting purposes.

eg: reporting sth on a yearly basis. for bigger companies the reports are usually monthly

Question 3

expense

Answer 3

decrease in owner’s equity (except of drawings) representing the consumption of economic benefits in the form of loss in assets or increase in liabilities.

eg. salary expense

Question 4

going concern

Answer 4

The assumption that the entity will be moving forward with their business in the upcoming year while using its assets rather than sell them.

eg. companues like google continuing on and not going bankrupt

Question 5

current liabilities

Answer 5

obligations of the entity that are expected to be paid or satisfied within the 1 year of balance sheet date.

eg. trade creditors

Question 6

depreciation expense

Answer 6

the portion of the non current asset that is assigned to expense over time.

eg. office or land depreciation expense

Question 7

unearned revenue

Answer 7

pre collected money for service that will be provided to the customer in the future. initially it’s a liability but later on will be recognised as revenue once the service is done.
eg. lawyers taking money before the service

Question 8

Adjusting entry

Answer 8

journal entries made at the end of accounting period to update or correct the account balance.
eg. charge the depreciation expense at the end of the year

Question 9

operating activities

Answer 9

the provision of and payment of goods and services

eg. paying the supplier for goods they provided

Question 10

Investing activities

Answer 10

The acquisition and disposal of long term assets

Question 11

Financing activities

Answer 11

The raising of funds for an entity to carry out its operating and investing activities

eg. taking loans for the business purpose

Question 12

Balance sheet

Answer 12

The report that shows the financial position if an entity at a specific point in time showing the assets, liabilities and equity.

Question 13

assets

Answer 13

resources that has an economic value that the entity controls with the expectations that it will bring future benefit to the business.

eg. computers used in office by the workers for the daily work

Question 14

equity

Answer 14

the residual interest of the owner in the assets of the entity

Question 15

income statement (profit/loss statement)

Answer 15

reports financial performance over a specific time period.

eg. the income statement that the company makes per month

Question 16

Income

Answer 16

Increase in economic benefits in the form of inflows or increase of assets or with the decrease of liabilities that result in equity

eg. service revenue

Question 17

statement of cash flows

Answer 17

entity’s cash inflows or outflows over a period of time

Question 18

cash method

Answer 18

the cash method of accounting that recognises sales only when the cash is received from the customer and recognises expense only when cash is given.

eg. if a business sells goods worth of 1000 dollars then it will only be recorded once the business receives the money

Question 19

accrual basis

Answer 19

the cash method of accounting where the revenue and expense is recorded when they’re incurred.

for example, electricity expense that is paid at the end of the month but throughout the month the electricity expense is calculated

Question 20

accounting entity assumption

Answer 20

the business is a separate legal entity from the owner.

Question 21

faithful representation

Answer 21

information presented faithfully, without bias or undue error

Question 22

verifiability/objectivity

Answer 22

different observers can come to the decision that the information faithfully represents what it claims to

Question 23

t-account

Answer 23

financial records that use double-entry bookkeeping

Question 24

running balance accounts

Answer 24

the sum of present debit and credit amounts after the previous day’s balance have been deducted

Question 25

trial balance

Answer 25

financial report showing the closing balances of all accounts in the general ledger at a point in time