Accounting basics Flashcards
Statement of financial position has three elements namely
assets, liabilities and equity
Statement of comprehensive income is made up from two elements
income and expenses.
The preparation and presentation of financial statements is regulated by Generally Accepted Accounting Principles which, in Pakistan, are mainly
Companies Act, 2017 and International Financial Reporting Standards.
There are two kinds of accounting:
financial accounting and managerial accounting.
Financial accounting (and reporting) is a term that describes:
maintaining financial transactions and showing a financial statement to shareholders
What is Cost and Management Accounting?
is the recording and communication of economic information to management for planning, control and decision making.
What is a Transactions?
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.
What is Books of prime entry?
This is the first place where transactions are recorded according to the type of transactions.
What are Ledgers?
Transactions (or transactions totals) are entered into the appropriate accounts in ledgers.
What is a Trial balance?
A list of balances can be extracted from the ledgers and this list is called trial balance.
What are Financial statements?
The figures in trial balance are adjusted for period-end adjustments and financial statements are prepared.
Items of a long-term nature, such as property, plant and equipment are…………?
‘capital items’
a short-term nature, particularly items that are used or occur in the normal cycle of business operations, are
‘revenue items’.
What are Capital expenditure?
is expenditure made to acquire or improve long term assets that are used by the business.
What are Revenue expenditure?
is expenditure on day-to-day operating expenses.
_________means recognizing a cost as an asset or part of the cost of an expenditure as an asset.
capitalisation
when an item of cost is ‘___’ it is treated as an asset rather than as an ‘expense.’
capitalised
_________reports the financial position of an entity as at a particular date, usually the end of a financial year.
A statement of financial position (also called balance sheet)
assets that provide economic benefits in the short term?
Current assets
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.
Non-current assets
Assets - Liability =
Equity
Income is usually classified into revenue and other items of income:
Revenue and other income
The concepts, principles, conventions, laws, rules and regulations that are used to prepare and present financial statements are known as
Generally Accepted Accounting Principles (GAAPs).
The main sources of GAAPs in Pakistani jurisdiction are:
Companies Act, 2017; and
International Financial Reporting Standards (IFRSs)
Many countries and companies whose shares are traded on the world’s stock markets have adopted………
IFRSs issued by the International Accounting Standards Board (IASB).
Whenever owner pay from private funds,
capital gets credited
The terms accounting and book keeping are classified as
Different
