Accounting Flashcards
What are the 2 types of businesses
Services
Trading
What is bank overdraft
The bank allows you to spend more money than you have
Give eg.s of a non current liability
Mortgage
Car finance
Loans
Give eg. Of curent liabilities
creditors
bank overdraft
tax
What is the accounting equation
A=O+L
Owners equity sub divided
CIDE
Capital
Interest
Drawings
Expenses
How to work out owners equity
C+I-D-E
OE=A-L
What is the accounting cycle
Transaction
Source documents
CRJ+CPJ(documents summarized )
General ledger
Trial balance
Financial statement
What source documents are used when you receive money
Receipt
Deposit slip
CRT
Cash invoice
What is the source document for CRJ
CRT
Receipt
What is the source document for CPJ
Cheque counterfoil
Why is accounting important
It forms the basis on which the businesses management can make financial decisions.
What is accounting
The keeping of accurate records that have an effect on the financial position of the business. Then recorded and placed onto the financial statement do that the business can make informed financial desicions
Why is it important to have international standards
To be able to compare the financial performances in your and other countries
To compare the financial progress over one year by matching figures
What are the GAAP principles
Materiality concept
Historical cost concept
Going concern principal
Business entity
Matching principal
What is the historical cost concept
Eg
All assets are shown at their original cost price in the general ledger
Not at the current market value
Price of building then is shown now
The business entity
The business is seen as a separate entity from the owner
Separate bank accounts and financial records
The matching principle
Eg
All income and expenses for a specific financial period should be shown in that time period to calculate profit/loss
Debtor bought last year but only paying this year, should be shown this year
Materiality concept
Eg
Financial statements should be kept as simple as possible only items that will have an important impact on understanding the financial statements of the busines should be shown
Postage-sundry expenses
Going concern principle
It is always assumed that the business will continue to exist(remain going concern)
If it is known that it wont, it should be made availible to those that have an interest
