Accounting Fundamentals Flashcards
Transaction
an agreement between two parties to exchange goods or services for payment
Source documents
the pieces of paper that provide both the evidence that a transaction has occurred, and the details of the transaction itself
list the Accounting principles
entity, going concern, reporting period, historical cost, consistency, conservatism, monetary unit.
entity principle
the business is separate from the owner and other entities, and its records should be kept on this basis
Qualitative characteristics
U R R C (U R REALLY CUTE)
understandability, relevance, reliability, comparability.
relevance
reports should include all information which is useful for decision making
reliability
reports should contain information verified by source document evidence so that it is free from bias
comparability
reports should be able to be compared over time through the use of consistent accounting procedures
understandability
reports should be presented in a manner that makes it easy for the user to comprehend their meaning
asset
a resource controlled by the entity (as a result of past events) from which future economic benefits are expected
liability
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
owner’s equity
the residual interest in the assets of the entity after the liabilities are deducted
equities
claims on the assets of the firm, consisting of both liabilities and owner’s equity
balance sheet
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
current asset
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
non-current
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
current liability
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
non-current liability
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
small business
a business in which the owner and manager is the same person, and which employs fewer than 12 people
term deposit
an investment option that requires the investor to agree to invest for a specified length of time
dividend
a share of the profit earned by a company that is distributed to sharehold
sole proprietorship
a business owned by a single individual, operating their business in their own right under their own name or a registered business name
unlimited liability
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
proprietary company
a business that exists as a separate legal entity that is entitled to do business in its own right
