Accounting

Question 1

Define: assets.

Answer 1

Resources of monetary value a business owns or is owed.
Current: expected to be turned into cash within next 12 months (eg. Cash, stock, debtors)
Non-current: intended to be controlled for greater than 12 months to generate income (eg. Cash register, building, shop fittings)

Question 2

Define: liabilities:

Answer 2

Present obligations or debts of the business.
Current: due for payment within next 12 months (loans, phone bill, creditors)
Non-current: due over a period greater than 12 months (eg. Mortgage)

Question 3

Define: owners equity

Answer 3

Owners investment or contribution to business. Residual interest after deduction of liabilities from assets. Known as owners ‘capital’.

Question 4

What is the accounting equation?

Answer 4

Assets - liabilities = owners equity.

Question 5

Define: accounting

Answer 5

The collection, recording and reporting of financial information to assist business owners in decision making. An accountant advises a business owner in what to do relating to finances.