Accounting-Senior Semester 1

Question 1

Accounting definition:

Answer 1

Accounting is the process of identifying, measuring, interpreting and communicating financial and other information to interested parties.

Question 2

What is the Accounting Entity Assumption?

Answer 2

Presumes that a business enterprise (entity) has an existence separate from the private financial affairs of its owner/s.

Question 3

Sole trader?

Answer 3

Is a person who is the only owner of a business.

Question 4

Assets?

Answer 4

Are items of value owned by the business.

Question 5

Liabilities?

Answer 5

Are amounts that a business owes to other people or organisations.

Question 6

Revenue?

Answer 6

Is income earned by a business.

Question 7

Expense?

Answer 7

Are the costs incurred in the earning of revenue.

Question 8

Owner’s Equity?

Answer 8

Is the value of any investment the owner has made in the business.

Question 9

What is the accounting standard?

Answer 9

Are rules, practices and procedures with which members of the accounting bodies must comply.

Question 10

Capital?

Answer 10

The investment the owner places in the business.

Question 11

Drawings

Answer 11

Any investment, cash or inventories, the owner withdraws from the business.

Question 12

Explain the double entry process

Answer 12

Double entry means that when a transaction is recorded, total debits for that transaction must equal total credits for the transaction.

Question 13

Explain the Accounting Process

Answer 13

The accounting process is a system for recording financial information. This process begins with a business event: a transaction that sets off a chain of events, which are called the accounting process.
Transaction > source document > analyse the transaction recorded in the source document > Journalise the transaction > Post to the general ledger > prepare a trial balance

Question 14

“The Accounting Equation is always an equality”. Explain

Answer 14

The accounting equation is always an equality because the sources of funds in terms of liabilities and owners equity equal the uses of funds. The uses of funds in a business is known as an asset.
Since assets have a debit nature and this is one side of the accounting equation and the other side of the equation is liabilities and owners equity which has a credit nature, the accounting equation will always equal as total debits must equal total credits for every transaction that takes place.

Question 15

the first objective of accounting

Answer 15

Provide information to people who need to make decisions about the business

Question 16

the second objective of accounting

Answer 16

Ensure accountability

Question 17

the third objective of accounting

Answer 17

evaluate the performance of the business