Accounting Documents and Systems

Question 1

What is accounting?

Answer 1

accounting is a way of recording, analysing and summarising the transaction of an entity

Question 2

What are the three types of business entity?

Answer 2

sole trader
partnership
limited liability companies

Question 3

soletrader

Answer 3

owner/manager - takes all liability

Question 4

partnership

Answer 4

similar to sole trader but 2 or more people

Question 5

limited liability company

Answer 5

share holders - owners
managers - directors

separate legal entity - if business fails, all shareholders lose their investment

Question 6

Limited private

Answer 6

shares are not listed

Question 7

Plc shares

Answer 7

listed could

Question 8

What is the objective of financial reporting?

Answer 8

it mentions the primary users of financial info (eg. investors, lenders, and other creditors and other groups) may be interested in financial information

Question 9

What would investors look for in a financial statement?

Answer 9

profitability

future prospects

risk and return

Question 10

What would employees look for in a financial statement?

Answer 10

profitability

going concern - job security, cash, pension

Question 11

What would lenders look for in a financial statement?

Answer 11

cash

assets

other loans

Question 12

What would suppliers look for in a financial statement?

Answer 12

cash

future prospects

going concern

Question 13

What would customers look for in a financial statement?

Answer 13

ethical

going concern - provide goods and services

profitability - value for money

Question 14

What would government and their agencies look for in a financial statement?

Answer 14

profitability

stats - diversity, competition and environment

compliance with law

Question 15

What would public look for in a financial statement?

Answer 15

customer - contribution to local economy and society

Question 16

IFRS

Answer 16

International Financial Reporting Standard

Question 17

IAS

Answer 17

International Accounting Standard

Question 18

What does an IAS presentation of financial statement identify?

Answer 18

statement of financial position

statement of profit or loss

a statement of changes in equity

a statement of cash flows and notes

Question 19

What is the statement of financial position in the UK called?

Answer 19

the balance sheet

Question 20

Statement of financial position

Answer 20

a list of all the assets controlled and the liabilities owned by business as a particular date

Question 21

What is the statement of financial position quantify?

Answer 21

the amount of shareholder interest is in the company = equity

Question 22

What is equity?

Answer 22

amount invested in a business by the owners

Question 23

What is equity known as for soletraders?

Answer 23

capital

Question 24

What is a non-current asset?

Answer 24

assets and property owned by a business that are not easily converted to cash within a year

Question 25

What is a current asset?

Answer 25

easily sold and highly liquidity

Question 26

What is capital?

Answer 26

the assets and cash in a business

Question 27

What's a non-current liability?

Answer 27

debts a business owes, but isn't due to pay for at least 12 months

Question 28

What is a current liability?

Answer 28

debt a business owes which is due within 12 months

Question 29

Trade payables

Answer 29

short-term expenses incurred by businesses when they use products or services from a third-party vendor or supplier to deliver their products to their customer

Question 30

Accruals

Answer 30

amounts of money that have been earned or spent, but not yet paid

Question 31

What is the statement of profit or loss called in the UK?

Answer 31

profit or loss account

Question 32

What was the statement of profit or loss called in the UK?

Answer 32

income statement

Question 33

Statement of profit or loss

Answer 33

a record of income recognised and expenditure incurred over a given period it is a record of the entity's financial performance over a period of time the statement shows whether a business has had more revenue than expenditure (profit) or a loss

Question 34

What is delivery inwards?

Answer 34

delivery costs

Question 35

Sundry incomes

Answer 35

----, dividend, rental

Question 36

Delivery outwards

Answer 36

cost to deliver to consumer

Question 37

Depreciation

Answer 37

charge forwarding non-current asset

Question 38

Bad and doubtful debts

Answer 38

trade receivables

Question 39

cost of sales =

Answer 39

opening inventory + purchase + cost of delivery - closing inventory

Question 40

What is the purpose of a financial statement that lists and entity's total assets and total capital/liability to show:

Answer 40

financial position of the entity at particular moment in time

Question 41

What is the business entity concept?

Answer 41

business is separate to owner and personal transaction of the owner should never be mixed with business transaction when considering a limited liability company that distinction is laid down in law - the company has separate legal identity