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commerce > accounting > Flashcards

accounting Flashcards

1
Q

what is step 1 of the accounting cycle?

A

identify transactions

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2
Q

what is step 2 of the accounting cycle?

A

prepare journal entries

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3
Q

what is step 3 of the accounting cycle?

A

post to general ledger

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4
Q

what is step 4 of the accounting cycle?

A

unadjusted trial balance

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5
Q

what is step 5 of the accounting cycle?

A

post adjusting entries

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6
Q

what is step 6 of the accounting cycle?

A

adjusted trial balance

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7
Q

what is step 7 of the accounting cycle?

A

create financial statements

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8
Q

define accounting

A

the collection, recording and reporting of financial information to assist businesses owners in decision-making

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9
Q

what is financial data

A

raw facts and figures upon which financial information is based

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10
Q

what are assets?

A

what a business owns

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11
Q

what are source documents?

A

the pieces of paper that provide both the evidence that a transaction has occured, and the details of that transaction

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12
Q

what are liabilities?

A

what a business owes

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13
Q

what is owners equity?

A

what is left within the business once the assets have been used to pay the liabilities

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14
Q

what is a transaction?

A

an agreement between 2 parties to exchange goods or services for payments

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15
Q

what is the order of the accounting process

A
  1. collecting source documents
  2. recording info
  3. reporting
  4. providing advice
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16
Q

explain the accounting process of collecting source documents

A

collecting source documents relating to transactions e.g. receipts

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17
Q

what is an example of a source document relating to transactions

A

receipts, cheque butts, invoices, memos, bank statements etc.

18
Q

explain the accounting process of recording transactions

A

information from source documents must be written down or recorded

19
Q

explain the accounting process of reporting in financial reports

A

info that has been generated from the recording stage can now be reported as financial info so the business owner can assess and make decisions

20
Q

explain the accounting process of providing advice

A

using reports, accountants can now make some suggestions as to appropriate cources of action for business owners/managers

21
Q

what is stage 1 of the accounting process?

A

collecting source documents

22
Q

what is stage 2 of the accounting process?

A

recording transactions

23
Q

what is stage 3 of the accounting process?

A

reporting/preparing financial reports

24
Q

what is stage 4 of the accounting process?

A

advice (providing advice to the owner of the business)

25
Q

what is an accounting assumption?

A

rules or guidelines that accountants follow that govern the way accounting information is recorded

26
Q

what are the 4 accounting assumptions?

A
  1. monetary unit
  2. historical cost
  3. entity principle
  4. going concern
27
Q

explain the monetary unit

A

all items must be recorded and reported in the currency of the country of location where the reports are being prepared

28
Q

explain the historical cost

A

transactions should be recorded at their original purchase price

29
Q

explain the entity principle

A

the business is seperate from the owner and other businesses. It’s records should be kept on this basis

30
Q

explain going concern

A

the life of the business is assumed to be continuous, and its records are kept on that basis

31
Q

what is the accounting equation?

A

A=L+E
Assets= Liabilities+ Owners Equity

32
Q

expanded definition of assets:

A

a possesion of a business that will bring the business benefits in the future.

33
Q

what is an example of an asset?

A

a bus, land, a computer, a car etc.

34
Q

what are debtors?

A

people that owe your business money

35
Q

are debtors assets? why?

A

yes because they provide money to a business that gives the business benefits

36
Q

what are the 3 questions to determine whether or not something is an asset?

A
  1. Does your business own it?
  2. Will it bring your business benefits in the future?
  3. Can you value it accurately?
37
Q

What is a liability?

A

An obligation of the business, which needs to be paid by the business ( the debt a business has)

38
Q

what is an exampke of a liability?

A

loans, creditors, etc.

39
Q

What is a creditor?

A

Any business/ person that a business owes money to

40
Q

What is owners equity?

A

What is left over in the assets of the business after deducting all its liabilities

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