Accounting and Bookkeeping Fundamentals

Question 1

Accounts receivable represents:

Answer 1

Money that is due to the business from its debtors (buyers, customers, or government groups).

Question 2

What is a debtor?

Answer 2

Debtor is the person or entity who owes money for the service provided.

Question 3

Accounts payable indicates:

Answer 3

Money that is owed to creditors by the business (those that have lent money to the business in some way).

Question 4

What is a creditor?

Answer 4

A creditor is the party that provided a service/product on credit to the debtor (business/person).

Question 5

Accounts payable & Accounts receivable only exist when there is a purchase or sale made on _______ ________.

Answer 5

Credit terms

Question 6

When goods or services are PURCHASED on credit terms this will be recorded as an ACCOUNTS PAYABLE which is a _______

Answer 6

Liability

Question 7

When goods or services are SOLD on credit terms this will be recorded as an ACCOUNTS RECEIVABLE, which is an __

Answer 7

Asset

Question 8

Examples of current assets consumed within one year.
Name 4

Answer 8

Cash
Inventory
Accounts receivable
Pre-paid assets

Question 9

Examples of non-current assets consumed in MORE than one year.

Answer 9

Land
Buildings
Office equipment
Furniture & fixtures
Vehicle

Question 10

What is a liability?
It is a _____ of the business.

Answer 10

Defined as a present obligation that arise from past events in which settlement is expected to result in an overflow from the entity.
A LIABILITY is a DEBT of the business.

Question 11

Example of current liabilities - which are settled within one year.

Answer 11

Accounts payable
Tax payable
Bank overdraft
Accrued expenses

Question 12

Example of non-current liabilities long term - more than one year

Answer 12

Bank loans
Mortgage
Long term leases

Question 13

What is bookkeeping comprised of?
Recording ____ _____
Posting _____ & ___
Producing _______
Maintenance & balancing ____, ____ ledgers, & ______ accounts.

Answer 13

Recording financial transactions
Posting debits and credits
Producing invoices
Maintaining and balancing subsidiaries, general ledgers, and historical accounts
Completing payroll.

Question 14

Accounting is comprised of:

Answer 14

Preparing adjusting entries ( recording expenses that have occurred but aren’t yet recorded in the bookkeeping process).
Preparing financial statements
Analysing costs of operations
Completing income tax returns
Aiding the business owner in understanding the impact of financial decisions

Question 15

Accounting can be defined as the process of:

Answer 15

Identifying
Measuring
Recording, and
Communicating economic information to permit informed judgments and decisions by users of the information

Question 16

The function of accounting can be defined as:

Answer 16

The process of recording, classifying, summarising, interpreting and communicating financial information.

Question 17

The purpose of Accounting can be defined as:

Answer 17

To supply meaningful, relevant, reliable and accurate financial information that will allow the users of that information to make informed judgment and decisions.

Question 18

Internal User of accounting information is someone who owns or is employed by the business and is in charge of running the daily operations of the business. Name the 4:

Answer 18

Business owner
Management
Board of directors
Employees

Question 19

External users of accounting information are interested in the financial health of the business, but they are outside the business and are not involved in the operation of the business. Name 5:

Answer 19

Customers
Suppliers
Creditors
Shareholders
Tax Authority

Question 20

If it is purchased on credit, it is a _____

Answer 20

Liability

Question 21

If the business owner invests money in the business, what 2 accounts increase?

Answer 21

Asset and owners equity

Question 22

When an asset is sold and the cash is banked what account shows the transactions

Answer 22

Asset (the selling of the asset) and asset $ increases from the sale

Question 23

If cx makes a purchase & pays immediately what 2 accounts are affected?

Answer 23

Bank asset increases and revenue increases