Accounting: revision

Question 1

Accounting Principles

Answer 1

• entity
• going concern
• reporting period
• historical cost
• consistency
• conservative
• monetary unit

Question 2

Qualitative characteristics…

Answer 2

• relevance
• reliability
• comparability
• understandability

Question 3

Accounting equation

Answer 3

Assets = Liabilities - Owner’s Equity

Question 4

Assets…

Answer 4

Resource controlled by entity (as a result of past events), from which future economic benefit is expected

Current >12 months
Non-current

Question 5

Liabilities

Answer 5

Present obligation of entity (as a result of past events), settlement of which will result in an outflow of economic benefit

Current >12 months
Non-current

Question 6

Owner’s Equity

Answer 6

Residual interest in the assets; after the liabilities are deducted

Question 7

Revenue

Answer 7

• inflow of economic benefits
• increase in assets (or decrease in liabilities)
• increase in owner’s equity (not capital)

Question 8

Expenses

Answer 8

• outflow of economic benefit
• decrease in assets (or increase in liabilities)
• reduces owner’s equity (not drawings)

Question 9

Internal finance…

Answer 9

• capital contribution

- retained earnings

Question 10

External finance…

Answer 10

• bank overdraft

- term loan

Question 11

Types of source doc.

Answer 11

• cash receipts
• cash register roll
• cheque
• cheque butt
• sales invoice (credit)
• memo

Question 12

What is GST?

Answer 12

• goods and service tax
• included when selling good and providing service
• 10% calc.
• capital, drawing, wages=no tax

Question 13

GST payable?

Answer 13

• GST owed to ATO

- when GST received is greater than; GST payed

Question 14

GST receivable?

Answer 14

• GST owed to business by ATO

- when GST payed is greater than; GST received

Question 15

GST settlement?

Answer 15

Payment made to ATO; to settle GST payable

Question 16

GST refund?

Answer 16

Cash received from ATO; to clear GST receivable

Question 17

What is Profit?

Answer 17

When revenue is greater than expenses

Question 18

Internal control mech.

Answer 18

• separation of duties
• rotation of duties
• effective employee training

Question 19

Cash control…

Answer 19

• payments made by cheque
• cash procedures changed periodically
• not all cash kept on premises

Question 20

Types of reports

Answer 20

• accounting equation
• balance sheet
• cash journals
• statements of receipts and payments
• income statement
• budgets (all of above)
• variance report (all of above)

Question 21

Accounting Process…

Answer 21

Source doc.> Recording> Reporting> Advice

Question 22

Difference between Bank Overdraft and Cash Deficit…

Answer 22

• bank overdraft= a negative bank balance

- cash deficit= a decrease in the level of cash

Question 23

Budgeting process?

Answer 23

-predicting the financial consequence of a future event

Question 24

Define: Cash Budget

Answer 24

accounting report that predicts:

• future cash receipts and payments
• possible cash; deficit or surplus
• estimated bank balance at end of month

Question 25

Define: Variance

Answer 25

accounting report; that compares actual to predicted reports

Question 26

Favourable or Unfavourable?

Answer 26

-(F) cash is higher than expected [cash received/revenue]
cash is lower than expected [cash payments/expense]

-(U)cash is lower than expected [cash received/revenue]
cash is higher than expected [cash payments/expense]