Accounting Fundamentals

Question 1

Transaction

Answer 1

an agreement between two parties to exchange goods or services for payment

Question 2

Source documents

Answer 2

the pieces of paper that provide both the evidence that a transaction has occurred, and the details of the transaction itself

Question 3

list the Accounting principles

Answer 3

entity, going concern, reporting period, historical cost, consistency, conservatism, monetary unit.

Question 4

entity principle

Answer 4

the business is separate from the owner and other entities, and its records should be kept on this basis

Question 5

Qualitative characteristics

Answer 5

U R R C (U R REALLY CUTE)

understandability, relevance, reliability, comparability.

Question 6

relevance

Answer 6

reports should include all information which is useful for decision making

Question 7

reliability

Answer 7

reports should contain information verified by source document evidence so that it is free from bias

Question 8

comparability

Answer 8

reports should be able to be compared over time through the use of consistent accounting procedures

Question 9

understandability

Answer 9

reports should be presented in a manner that makes it easy for the user to comprehend their meaning

Question 10

asset

Answer 10

a resource controlled by the entity (as a result of past events) from which future economic benefits are expected

Question 11

liability

Answer 11

a present obligation of the entity (as a result of past events) the settlement which is expected to result in an outflow of economic benefits

Question 12

owner’s equity

Answer 12

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

Question 13

equities

Answer 13

claims on the assets of the firm, consisting of both liabilities and owner’s equity

Question 14

balance sheet

Answer 14

an accounting report that details a firm’s financial position at a particular point in time by reporting its assets, liabilities and owner’s equity

Question 15

current asset

Answer 15

a resource controlled by the entity (as a result of past events) from which a future economic benefit is expected for in 12 months or less

Question 16

non-current

Answer 16

a resource controlled by the entity (as a result of past events) from which a future economic benefit is expected for more than 12 months

Question 17

current liability

Answer 17

a present obligation of the entity (arising from past events) the settlement of which is expected to result in an outflow of economic benefits in the next 12 months

Question 18

non-current liability

Answer 18

a present obligation (arising from past events), the settlements of which is expected to result in an outflow of economic benefits sometime after the next 12 months

Question 19

small business

Answer 19

a business in which the owner and manager is the same person, and which employs fewer than 12 people

Question 20

term deposit

Answer 20

an investment option that requires the investor to agree to invest for a specified length of time

Question 21

dividend

Answer 21

a share of the profit earned by a company that is distributed to sharehold

Question 22

sole proprietorship

Answer 22

a business owned by a single individual, operating their business in their own right under their own name or a registered business name

Question 23

unlimited liability

Answer 23

the legal status of sole proprietorship and partnerships is that they are not recognized as separate legal entities, so the owner is personally liable for the debts of the business

Question 24

proprietary company

Answer 24

a business that exists as a separate legal entity that is entitled to do business in its own right