Accounting as A System Flashcards
What are the stages of the accounting cycle?
- Identify and analyze transactions
- Journalize
- Posting to the Ledger
- Trial Balance Period
- Making Adjusting Entries
The accounting cycle is a series of steps that accountants use to ensure the accuracy and completeness of financial statements.
What is the first stage of the accounting cycle?
Identify and analyze transactions
What is the second stage of the accounting cycle?
Journalize
What is the third stage of the accounting cycle?
Posting to the Ledger
What is the fourth stage of the accounting cycle?
Trial Balance Period
What is the fifth stage of the accounting cycle?
Making Adjusting Entries
What is a business?
Organizations that provide goods and/or services to make a profit
List four activities that businesses engage in.
- Providing raw materials through mining, farming, fishing, etc.
- Manufacturing goods, turning raw materials into finished products
- Selling goods to the general public (retailers) or to other businesses (wholesalers)
- Providing services for other businesses and the general public
What defines a sole trader business?
One individual owns and controls the business
What happens to profits in a sole trader business?
All profits belong to the individual owner
What are the risks for a sole trader if the business is unsuccessful?
The individual can lose whatever has been invested and private possessions
What is a partnership in business terms?
A business owned by two or more individuals
How do partners in a partnership share profits?
Profits are shared between them
What is a key responsibility of partners in a partnership?
They are jointly responsible for the debts of the business
Fill in the blank: In a partnership, partners can lose their private possessions if the business is _______.
[unsuccessful]
What type of company is owned by shareholders who contribute to the funds needed to establish and run it?
Limited liability companies
Who manages the day-to-day operations of a limited liability company?
Directors elected by shareholders
What is the primary financial risk for shareholders in a limited liability company?
Limited to the amount they invest .
What are co-operatives primarily run to provide?
Goods and services to their members
How do successful co-operatives typically reward their members?
Share of surplus or reinvestment in the organization
True or False: Shareholders in a limited liability company risk losing their private funds if the company incurs debts.
False
Fill in the blank: Co-operatives are controlled by _______.
Members
What are non-profit organizations?
Organizations formed by members for particular activities, possibly social or sporting.
Do non-profit organizations aim to make a profit?
No, they do not aim to make a profit.
What must non-profit organizations be in order to survive?
Financially viable.
What are the main financial statements inspected by owners, managers, and stakeholders?
The income statement, balance sheet, and cash flow statement.
What is the chief source of information about profits or losses for sole traders, partnerships, and limited companies?
The income statement.
What components make up the income statement?
Trading account and statement of profit and loss.
Fill in the blank: The income statement includes a _______ and a statement of profit and loss.
trading account.
What terms are used instead of profit and loss in co-operatives and non-profit organizations?
Surpluses and deficits
What financial statement provides details of resources owned by a business?
Statement of financial position (balance sheet)
What additional financial statement must limited companies produce?
Cash flow statements
What does the statement of financial position reveal about resource use?
How successful the owners and managers have been in using resources well
This is assessed in conjunction with information about profits.
Fill in the blank: The statement of financial position is also known as a _______.
Balance sheet
This term is commonly used in accounting.
True or False: Cash flow statements are included in the basic financial statements for all organizations.
False
Only limited companies are required to produce cash flow statements.
