accounting Flashcards
PERIOD ASSUMPTION:
financial events are reported for a specific period of time, allowing valid comparisons of performance to be made. (cash flow statement)
ACCRUAL BASIS ASSUMPTION:
profit for a given period of time is determined by deducting expenses incurred from the revenue earned in that same period.
(income statement.)
GOING CONCERN ASSUMPTION:
a business will operate indefinitely and won’t be wound up in the near future.
EXAMPLE: balance sheet.
ACCOUNTING ENTITY ASSUMPTION:
a requirement that all relevant items be reported for a business entity, excluding any transactions of the owner and any other entity.
EXAMPLE: balance sheet.
RELEVANCE:
all information that could influence decision makers to be included in accounting reports.
FAITHFUL REPRESENTATION
information being reported to be complete, without bias and free from error.
COMPARABILITY:
financial reports to be prepared so that performance can be compared.
VERIFIABILITY:
accounting information to be checked against business documents.
TIMELINESS:
information to be presented in a timely manner so that it may influence decisions.
UNDERSTANDABILITY:
information to be presented clearly and concisely in an understandable fashion.
EXPLAIN WHEN A BREACH HAS OCCURRED
if the rules are not followed, or mandatory details are not added, the documents become invalid and cannot be processed.
CHEQUE BUTTS:
a document used to verify the details of cash payments made by cheque (MUST INCLUDE: date, payee full name, details, amount, document number.)
RECEIPTS:
a document used to verify the receipt of cash by a business
(MUST INCLUDE: receipt number, date, ABN, the amount, details, signature.)
EFTPOS RECEIPTS:
document created by an EFTPOS terminal when a customer has paid by credit card, debit card, or gift card. (MUST INCLUDE: merchant number, terminal number, type of card, date/time, authorisation, total.)
INVOICES:
a document used to verify that a credit sale or purchase has taken place. (MUST INCLUDE: ABN, tax invoice number, details, GST, total, signature.)
CREDIT NOTES:
a document issued by a business to verify that goods have been returned. (MUST INCLUDE: ABN, credit note, date, reason, GST, total.)
ASSETS:
resent economic resources under the control of a business entity, with the
potential to produce future economic benefits.
CURRENT ASSETS:
are cash and other types of assets held primarily for the
purpose of sale or trading, or are reasonably expected to be converted to cash, sold, or consumed by a business within 12 months after the end of the reporting period,
NON-CURRENT ASSETS:
are expected to be used by a business entity for a number of years and are not held for resale.
LIABILITIES:
present obligations of an entity to transfer economic resources to another entity to produce economic benefits.
CURRENT LIABILITIES:
obligations of the entity that are reasonable expected to be settled within 12 months after the end of the reporting period.
NON-CURRENT LIABILITIES:
obligations of the entity that are not required to be settled within 12 months after the end of the reporting period.
OWNERS EQUITY:
the residual interest an owner has in a business after liabilities are deducted from assets.
EXPENSES:
decreases in assets or increases in liabilities that result in a decrease in owners’ equity.
REVENUE:
increases in assets or decreased in liabilities that result in an increase in owner’s equity, achieved by providing goods or services to customers.
GST LIABILITY:
an obligation to the taxation office that exists because the GST collected by a business exceeds the GST it paid to its suppliers.
CALCULATING GST LIABILITY:
GST collected - GST paid
HOW ARE THEY RECORDED IN CASH JOURNALS? cash payment journals, under sundaes.
ACCOUNTING EQUATION:
ASSETS = liabilities + owners equity
OWNERS EQUITY = assets - liabilities
LIABILITIES = assets - owners equity
CASH RECEIPT JOURNALS
a summary of a firm’s receipts and payments over a stated period of time.
CASH PAYMENT JOURNALS:
a daily record of the details of all cash payments.
CASH FLOW STATEMENT
an accounting report that states all cash inflows and outflows over a
period.
OPERATING ACTIVITIES:
cash flows that relate to the day-to-day operations of a
business.
INVESTING ACTIVITIES:
cash flows that result from the purchase or the sale of non-current assets for cash.
FINANCING ACTIVITIES:
cash flows that relate to changes in the financial structures of a business.
