Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Bus Man Year 10 > Accounting Book 1 > Flashcards

Accounting Book 1 Flashcards

1
Q

What is accounting

A

accounting is a management information system that involves the collecting, sorting, classifying and recording of financial data to produce and report financial information to assist business owners in decision making.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Non-financial information

A

any information that cannot be found in the financial statements, and not expressed in dollars and cents or reliant dollars and cents for its calculation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

users of financial information

A

Australian tax office, prospective owners, employees, banks and other financial institution, accounts payable and other suppliers, accounts receivable and other customers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Ethical considerations

A

the business decisions made by the owner will not be influenced by financial considerations including those which are social and environmental in nature

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Accounting process steps

A

source documents, recording, reporting, advice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Source documents

A

documents that provide both the evidence (proof) that a transaction has occurred and the details (extra info) of the transaction itself

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Recording

A

sorting, classifying and summarising the data contained in the source documents So that it is more useable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Reporting

A

The preparation of financial statements that communicate financial information to the owner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Advice

A

the provision to the owners of a range of options available to their aims/objectives, together with recommendations as to the suitability of those aims/objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Accounting process

A

The process of taking financial data and converting it into financial information in order to be able to make decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

EFT receipt vs receipt

A

Eft receipt has the same purpose as a normal receipt however the payment was done electronically (online banking) rather than in person

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what does EFT stand for

A

Electronic Funds Transfer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what does EFTPOS stand for

A

Electronic Funds Transfer Point Of Sale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Types of source documents

A

cheque butt, cheque, invoice, memo or memorandum, bank statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Accounting equation

A

assets = liabilities + owners equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Assets

A

a present economic resource controlled by the entity (as a result of past events) that has potential to produce future economic benefits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Liabilities

A

A present obligation of the entity (as a result of past events) to transfer an economic resource

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

owners equity

A

the residual interest in the assets of the entity after all its liabilities are deducted

Liabilities and owners equity show how the assets of a business have been financed e.g been brought on credit (accounts payable) liabilities represent what the business owes to external parties

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Accounting entity assumption

A

The assumption that the accounting records of asset, liabilities and business actives of the entity are kept completely seperate from those of the owner of the entity as well as from those of other entities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Current time frame

A

less than 12 months

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

non-current time frame

A

more than 12 months

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

current asset

A

a present economic resource controlled by the entity (as a result of past events) that is reasonably expected to be converted to cash, sold or consumed within the next 12 months after then end of the reporting period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Non-current asset

A

A present economic resource controlled by the entity (as a result of past events) that is not held for resale and is reasonably expected to be used for more than the next 12 months after the end of the reporting period

24
Q

Current liabilities

A

A present obligation of the entity (arising from past events) that are reasonable expected to be settled with a transfer of an economic resource within the next 12 months after these end of the reporting period

25
Q

Non-current liabilities

A

A present obligation of the entity (arising from past events) that are NOT expected to be settled with a transfer of an economic resource within the next 12 months after the end of the reporting period

26
Q

balance sheet

A

an accounting report that details a firms financial position at a particular point in time by reporting its assets, liabilities and owners equity

27
Q

examples of current asset

A

bank, accounts receivable, inventory of supplies

28
Q

Bank

A

the amount of cash in the business bank account(s)

29
Q

accounts receivable

A

an amount of money the business is expected to be paid for providing a good/service

30
Q

Accounts Payable

A

the amount of money the business is spending on suppliers (e.g purchase of flour)

31
Q

Inventory of supplies

A

this is a store of goods and suppliers on hand that the business can use I the process of providing the service their business delivers

32
Q

examples of current Liabilities

A

accounts payable, mortgage, Bank (overdraft)

33
Q

Mortgage

A

a loan taken out from a financial institution (usually a bank) for the purpose of buying a property/premises (building)

34
Q

Bank (overdraft)

A

If the bank balance is a liability, indicates that the business has a negative balance in its bank account and is obligated to return this to a positive balance - over withdrawn

35
Q

After a transaction which two things should remain true

A

every transaction will affect at least two “items” in the accounting equation
after recording these changes, the accounting equation must still balance

36
Q

transaction

A

an exchange of a good or a service with another party

37
Q

what happens once a transaction has occurred

A

a change in the “financial position” of the business by making adjustments to items in the assets and/or liabilities and/or owners equity

38
Q

purpose of the balance sheet

A

It is a tool that is used to determine key financial indicators that can measure the stability and or liquidity of a business

39
Q

liquidity

A

is the ability of the business to meet its short-term debts as they fall due

40
Q

stability

A

is the ability of the business to meet its debts and continue and operate in the long-term

41
Q

working capital ratio

A

is the liquidity indictor that measures the ratio of current liabilities to current assets to assess the firms ability to meet its short-term debts

42
Q

working capital ratio calculation

A

current assets
———————m
current liabilities

43
Q

assessing the working capital ratio

A

WCR is above a minimum of 1:1 this is adequate and indicates sufficient liquidity, as there is enough current assets to cover current lability of the business

WCR of less than 1:1 is worrying as current assets cannot cover current liabilities

WCR that is too high is also a concern as it means that there is a large amount of current assets that are not bing employed effectively or sitting idle

44
Q

how can you finance a business

A

internal sources of finance, external sources of finance

45
Q

Internal sources of finance

A

capital contribution from an owner, retained profit

46
Q

External sources of finance

A

trade credit, bank overdraft, term loan

47
Q

Trade credit

A

a form of external finance offered by one suppliers which allows customers to purchase good/services and pay at a later date – results in accounts payable

48
Q

term loan

A

provided by banks and other lenders for a specific purpose and repaid over a set time. a mortgage is a term loan, for the specific purpose of buying a property. involves a “principal” amount and interest payments

49
Q

internal finance advantages/disadvantages

A

advantages: no set repayment structure, no interest, owner(s) willing to wait for a profit before expecting a dividend

disadvantages: limited to the resources of the owner(s)

50
Q

External finance advantages/disadvantages (trade credit)

A

Advantages: immediate access to goods and service, can generate sales before payment required

Disadvantages: can only be used with that supplier, late fees may be incurred if paying late

51
Q

External finance advantages/disadvantages (bank overdraft)

A

advantages: available immediately facility is established, its flexible / can be used for seasonal variations in business

Disadvantages: high interest usually applied to O/D, can be recalled at short notice

52
Q

External finance advantages/disadvantages (term loans)

A

advantages: can purchase more expensive assets, if secured lower interest rate

Disadvantages: interest is charged, must be paid back in line with contractual terms

53
Q

Debt Ratio

A

measures the proportion of the firms assets that are funded by external sources of finance. it is a measure on the stability of a business

54
Q

Debt Ratio calculation

A

total liabilities
——————– x 100
Total assets.

55
Q

Assessing the debt ratio

A

a high debt ratio means that a high amount of the firms assets are funded by external sources, leading to pressure on the firms cash flow to meet principal and interest payments, therefore there is a higher risk of financial collapse
Low debt ratio could be a missed opportunity

Bus Man Year 10 (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions