accounting 901-905 Flashcards
define bookeeping
record of all financial transactions of a business
why are financial statements necessary
because they show if the business has made a profit or loss, it also helps in decision making.
accounting equation
asset = capital + liability
name types of source documents
1) receipts
2) invoices
3) debit/credit note
4) cheque counterfoils
name the books of prime entry
1) sales book
2) cash book
3) purchase book
4) sales return book
5) purchase return book
6) petty cash book
7) general journal
difference between current asset and non current asset
current asset - short term asset (stock, trade receivables)
non current asset : for long term use (building, machinery)
difference between trade discount and cash discount
trade discount: because items are bought in bulk
cash discount: because the customer pays earlier than credit period given
why is a trail balance important?
a trail balance is made to check the accuracy of the double entry method, if it fails to balance then an error has been made
difference beteween capital expenditure and revenue expenditure
capital - recorded in the long term asset account
revenue - used in the day to day operation of the business and recorded as profit/loss
difference between capital receipt and revenue receipt
capital - from other sources of revenue (loans)
revenue - from the business operations (sales)
what is the matching concept
when the income and expense matches each other, to ensure the right amount of profit/loss in a certain accounting period
what are intangible assets
assets that cannot be touched or felt - eg: copyrights/goodwill
what are the 3 ways of depreciation
1) straight-line depreciation - uniform depreciation
2) reducing balance - depreciation increases as lifespan goes on
3) revaluation - depends on revalued amount of last year
what is a disposable acc used for
when you sell off a non current asset
