Accounting

Question 1

accounting

definition and outcomes

Answer 1

the process of identifying, measuring, recording and communciationg the required information relating to current events of an organisation

planning and decision making

collection and recording of financial data

Question 2

main objectives of accounting

Answer 2

making a profit, increasing market share, fulfil market need and social need

Question 3

equation

profit

Answer 3

revenue - cost

Question 4

market share

Answer 4

proportion of sales belonging to a business out of total industry sales

percentage figure

Question 5

stakeholder

Answer 5

person or organisation with an interst in the performance of business AND can affect operations

Question 6

goal of the accounting process

Answer 6

to turn financial data into financial information

Question 7

process of accounting process

Answer 7

collecting,recording, preparing and providing

documents – records – reports – advice

Question 8

so basically accounting process is

Answer 8

collecting, recording, preparingl, providing

Question 9

types of reports

Answer 9

1. statement of receipts and payments
2. income statement
3. balance sheet

Question 10

statement of receipts and payments

Answer 10

lists cash receipts and payments during a reporting period, the change in bank balance and the opening and closing bank balances.

surplus and deficits

Question 11

surplus/deficit

Answer 11

the overall change in bank balance

Question 12

income statement

Answer 12

calculates profit （revenue and expenses)

whats the proft formula?

Question 13

balance sheet

Answer 13

reports what a business owes and owns. equities and assets

Question 14

equities

2 types

Answer 14

liabilities and owner’s equity

Question 15

liabilities

Answer 15

what you OWE. current and noncurrent

Question 16

owners equity

Answer 16

the residual interest in the assets of the entity after deducting all its liabilities

capital, drawings, net profit

Question 17

asset

Answer 17

a present economic resource controlled by the business that has potential to generate future economic benefit. current and noncurrent

Question 18

why do we split liabilites and assets into current and noncurrent

Answer 18

to make better decisions and to prioritise

Question 19

accounts receivable

Answer 19

customers who owe the business money – current asset

Question 20

accounts payable

Answer 20

suppliers of a business who are owed money – current liability

Question 21

what will an analysis of business performance include?

2 things

Answer 21

profitability and liquidity

Question 22

profitability

Answer 22

the ability of the business to earna profit, measured by comparing its profit against a base (sales, assests, owner’s equity)

basically the earning of profit

Question 23

liquidity

Answer 23

the ability of the business to meet its short-term debts as they fall due

basically the paying back of debts

Question 23

benchmarks

2 tools to assess performance

Answer 23

trends and variances

Question 24

trends

Answer 24

where changes over several periods form a pattern

Question 25

variances

Answer 25

compares the acual figures against the budgeted or expected figures to identify areas in which performace has been below

Question 26

bank overdraft

Answer 26

an external source of finance provided by a bank allowing bank holder to withdraw more than their current balance

Question 27

bank

Answer 27

the sum of all cash on-site in a business and the amount in their bank account

Question 28

capital

Answer 28

the assets contributed to the business by the owner

Question 29

drawings

Answer 29

money/assets withdrawn by the owner for their own personal use

Question 30

what is the net profit margin

Answer 30

the percentage of profit in all the sales

Question 31

formula for net profit margin

Answer 31

(net profit/net sales)x 100

Question 32

what is the gross profit margin

Answer 32

the percentage of each dollar of revenue that is kept as profit

Question 33

what does the size of the GPM indicate?

Answer 33

the size of the gap between selling and cost prices

Question 33

formula for gross profit margin

Answer 33

(gross profit/net sales) x 100

Question 34

what happens if the gap (percent) of GPM increases?

Answer 34

the business will make more profit per sale, but this doesn’t mean more profit overall

Question 35

types of non current liabilities

Answer 35

loans, mortgage

both are also current

Question 36

blank

Question 37

types of current liabilities

Answer 37

bank (overdraft), accounts payable

Question 38

types of current assets

Answer 38

bank, inventory, accounts receivable