Accounting and the Bus. Environment

Question 1

What is accounting?

Answer 1

the systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information.

Question 2

Father of accounting

Answer 2

Luca Pacioli

Question 3

an organization that uses economic resources or inputs to provide goods or services to customers in exchange for money or other goods and services

Answer 3

business entity

Question 4

Accrual principle

Answer 4

accounting transactions should be recorded in the accounting periods when they ACTUALLY OCCUR rather than in periods when there are cash flows associated with them.

Question 5

Double-entry bookkeeping

Answer 5

the fundamental concept underlying present-day bookkeeping and accounting; states that states that every financial transaction has equal and opposite effects in at least two different accounts; used to satisfy AE: Assets=liabilities+equity

Question 6

Going concern principle

Answer 6

the concept that a business will remain in the foreseeable future.

Question 7

Business entity concept

Answer 7

the transactions of a business should be kept separate from those of its owners and other businesses

Question 8

Monetary unit principle

Answer 8

the concept that a business should only record transactions that can be stated in terms of a unit of currency

Question 9

Full disclosure principle

Answer 9

the concept that you should include in or alongside the financial statements of a business ALL of the information that may impact a reader’s understanding of those financial statements

Question 10

Double-entry bookkeeping is used to satisfy that

Answer 10

Assets= Liabilities + Owner’s equity.

Question 11

Chart of accounts

Answer 11

A financial organizational tool that provides a complete listing of every account in an accounting system.

Question 12

account

Answer 12

a unique record for each type of asset, liability, equity, revenue and expense.

Question 13

Balance Sheet/SFP accounts

Answer 13

reflect the monitory value of the company- stock, assets, debts; are carried over from one fiscal year to the next.

Question 14

Nominal/temporary accounts

Answer 14

cleared at the end of each fiscal year through period end closing process.

Question 15

Journal

Answer 15

record of financial transactions by date; called the book of original entry

Question 16

purposes of

1. SJ
2. PJ
3. CDJ
4. CRJ

Answer 16

1. SJ- sales to customers
2. PJ- all acquisitions made on credit
3. CDJ- all cash outflows
4. CRJ- all cash inflows