Accounting and Bookkeeping Fundamentals Flashcards
Accounts receivable represents:
Money that is due to the business from its debtors (buyers, customers, or government groups).
What is a debtor?
Debtor is the person or entity who owes money for the service provided.
Accounts payable indicates:
Money that is owed to creditors by the business (those that have lent money to the business in some way).
What is a creditor?
A creditor is the party that provided a service/product on credit to the debtor (business/person).
Accounts payable & Accounts receivable only exist when there is a purchase or sale made on _______ ________.
Credit terms
When goods or services are PURCHASED on credit terms this will be recorded as an ACCOUNTS PAYABLE which is a _______
Liability
When goods or services are SOLD on credit terms this will be recorded as an ACCOUNTS RECEIVABLE, which is an __
Asset
Examples of current assets consumed within one year.
Name 4
Cash
Inventory
Accounts receivable
Pre-paid assets
Examples of non-current assets consumed in MORE than one year.
Land
Buildings
Office equipment
Furniture & fixtures
Vehicle
What is a liability?
It is a _____ of the business.
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.
Example of current liabilities - which are settled within one year.
Accounts payable
Tax payable
Bank overdraft
Accrued expenses
Example of non-current liabilities long term - more than one year
Bank loans
Mortgage
Long term leases
What is bookkeeping comprised of?
Recording ____ _____
Posting _____ & ___
Producing _______
Maintenance & balancing ____, ____ ledgers, & ______ accounts.
Recording financial transactions
Posting debits and credits
Producing invoices
Maintaining and balancing subsidiaries, general ledgers, and historical accounts
Completing payroll.
Accounting is comprised of:
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
Accounting can be defined as the process of:
Identifying
Measuring
Recording, and
Communicating economic information to permit informed judgments and decisions by users of the information
The function of accounting can be defined as:
The process of recording, classifying, summarising, interpreting and communicating financial information.
The purpose of Accounting can be defined as:
To supply meaningful, relevant, reliable and accurate financial information that will allow the users of that information to make informed judgment and decisions.
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:
Business owner
Management
Board of directors
Employees
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:
Customers
Suppliers
Creditors
Shareholders
Tax Authority
If it is purchased on credit, it is a _____
Liability
If the business owner invests money in the business, what 2 accounts increase?
Asset and owners equity
When an asset is sold and the cash is banked what account shows the transactions
Asset (the selling of the asset) and asset $ increases from the sale
If cx makes a purchase & pays immediately what 2 accounts are affected?
Bank asset increases and revenue increases
