Accounting

Question 1

What do accountants do?

Answer 1

1. They record, analyse and interpret financial or economic activities of a business.
2. Make meaningful and effective decision based on up to date and accurate records of a company.

Question 2

Most activities that a business engages in are about financial worth list them.

Answer 2

1. How much will any or all of this cost
2. how much were our expenses last year
3. How much money do we have to afford a new store or addition
4. How much money can we afford to spend on
5. is it wise for us to merge with another business?

Question 3

What are transactions?

Answer 3

• Recorded activities of a business that involve money
• They occur when something of value is exchanged between parties.
• Large businesses can conduct up to thousands of transaction in a single day.

Question 4

What is bookkeeping?

Answer 4

recording of all transactions for a business in a specific format

Question 5

What is double-entry bookkeeping?

Answer 5

• each transaction involves 2 changes
  -one increase results in one decrease, two increases result in two decreases.
  For example, a business pays $100 for labour
  -this decreases cash balance
  -increase in expense labour

Question 6

What is personal accounting?

Answer 6

-less about recording transactions and more to do with determining Net worth

Question 7

what is net worth/ personal equity?

Answer 7

The value of everything you own after all debts are paid.

Question 8

What are assets

Answer 8

something that has value and is owned by a person for example if you have a bicycle that is an asset

Question 9

What are liabilities

Answer 9

debt or amount owed to other for example you owe your dad $100 towards your phone.

Question 10

How do you find Net worth

Answer 10

Assets-libilities= net worth for example if Julie has $1400 as a total asset and debt of $300 her net worth would be 
$1400-$300= $1100

Question 11

What is business & financial statements

Answer 11

• presents financial information in a way that helps business people keep track of the financial health of the business
  1. balance sheet
  2. income statement
  3. statment of cash flow

Question 12

What is balance sheet

Answer 12

-The snapshot that indicates how a business is doing on a specific day.
- does not indicate whether a business has made a profit
The sheet is balanced because the left side must equal the right side

Question 13

list all formulas of assets, liabilities and owners equity

Answer 13

1. Assets-liabilites= net worth

2. liabilites+ net worth= Assets

Question 14

Assets must…?

Answer 14

-provide future economic benefit (i.e help make $$)
-cost principle- recorded at historical cost (the price you paid on the day you bought them)
deprecation-loses value over time

Question 15

What are the current assets?

Answer 15

Items owned by a business that is “used up quickly, usually in on year or less”
listen in order of liquidity

Question 16

What is liquidity

Answer 16

how easily the assets can be converted to cash. (most liquid to least liquid)

1. cash
2. accounts receivable
3. inventory
4. supplies

Question 17

what is accounts receivable

Answer 17

Money owed to the business by customers usually paid within 30 days

Question 18

What are fixed assets

Answer 18

Item that a business keeps for a longer period of time and uses to perform service
listed in order of useful life-longest useful life to shortest useful life
1. land
2.building
3.equipment
4. furniture
5. vehicles

Question 19

What is accounts payable

Answer 19

purchases made on credit/account that have not yet been paid

Question 20

what are current liabilities

Answer 20

debt that must be paid within one year

Question 21

What is revenue

what are expenses

Answer 21

revenue: Money or the promise of money, received from sales of goods or services
Expenses: expenditures that help a business generate revenue

Question 22

Why is income statement important

Answer 22

• owners want to know if they’re making profit
• investors or banker want to know whether to invest or loan money
• to pay taxes, a business must know its profit/loss

Question 23

What are operating expenses?

Answer 23

They are costs of operating the business; used to help generate revenue for example salaries, advertising & utilities.

Question 24

What is matching principle

Answer 24

all the costs of doing business in a particular time period are matched with the revenue generated during the same period.

Question 25

how is net profit calculated

Answer 25

net profit is calculated first then transferred to the balance sheet as part of owners equity.
Creditors and owners have claims on the assets of the business.

Question 26

What is cash flow statement

Answer 26

A summary of the cash-in and cash-out transactions of a business
helps to predict the amount of cash it needs to meet obligations.

Question 27

What are ways to increase cash flow

Answer 27

• might seek extra investment
• reduce inventory purchases
• increase effort to collect account receivables