Accounting basics

Question 1

Statement of financial position has three elements namely

Answer 1

assets, liabilities and equity

Question 2

Statement of comprehensive income is made up from two elements

Answer 2

income and expenses.

Question 3

The preparation and presentation of financial statements is regulated by Generally Accepted Accounting Principles which, in Pakistan, are mainly

Answer 3

Companies Act, 2017 and International Financial Reporting Standards.

Question 4

There are two kinds of accounting:

Answer 4

financial accounting and managerial accounting.

Question 5

Financial accounting (and reporting) is a term that describes:

Answer 5

maintaining financial transactions and showing a financial statement to shareholders

Question 6

What is Cost and Management Accounting?

Answer 6

is the recording and communication of economic information to management for planning, control and decision making.

Question 7

What is a Transactions?

Answer 7

An event that has a monetary impact and needs to be recorded in books of accounts is called transaction. A business usually has thousands of transactions in an accounting period.

Question 8

What is Books of prime entry?

Answer 8

This is the first place where transactions are recorded according to the type of transactions.

Question 9

What are Ledgers?

Answer 9

Transactions (or transactions totals) are entered into the appropriate accounts in ledgers.

Question 10

What is a Trial balance?

Answer 10

A list of balances can be extracted from the ledgers and this list is called trial balance.

Question 11

What are Financial statements?

Answer 11

The figures in trial balance are adjusted for period-end adjustments and financial statements are prepared.

Question 12

Items of a long-term nature, such as property, plant and equipment are…………?

Answer 12

‘capital items’

Question 13

a short-term nature, particularly items that are used or occur in the normal cycle of business operations, are

Answer 13

‘revenue items’.

Question 14

What are Capital expenditure?

Answer 14

is expenditure made to acquire or improve long term assets that are used by the business.

Question 15

What are Revenue expenditure?

Answer 15

is expenditure on day-to-day operating expenses.

Question 16

_________means recognizing a cost as an asset or part of the cost of an expenditure as an asset.

Answer 16

capitalisation

Question 17

when an item of cost is ‘___’ it is treated as an asset rather than as an ‘expense.’

Answer 17

capitalised

Question 18

_________reports the financial position of an entity as at a particular date, usually the end of a financial year.

Answer 18

A statement of financial position (also called balance sheet)

Question 19

assets that provide economic benefits in the short term?

Answer 19

Current assets

Question 20

assets that have a long useful life and provide future economic benefits for an entity over a period of several years. For example, buildings and plant & machinery.

Answer 20

Non-current assets

Question 21

Assets - Liability =

Answer 21

Equity

Question 22

Income is usually classified into revenue and other items of income:

Answer 22

Revenue and other income

Question 23

The concepts, principles, conventions, laws, rules and regulations that are used to prepare and present financial statements are known as

Answer 23

Generally Accepted Accounting Principles (GAAPs).

Question 24

The main sources of GAAPs in Pakistani jurisdiction are:

Answer 24

 Companies Act, 2017; and

 International Financial Reporting Standards (IFRSs)

Question 25

Many countries and companies whose shares are traded on the world’s stock markets have adopted………

Answer 25

IFRSs issued by the International Accounting Standards Board (IASB).

Question 26

Whenever owner pay from private funds,

Answer 26

capital gets credited

Question 27

The terms accounting and book keeping are classified as

Answer 27

Different