Accounting Terms

Question 1

Assets

Answer 1

Assets are future economic benefits controlled by the entity as a result of past transactions and other past events (Debit/Dr)

Question 2

Liabilities

Answer 2

Liabilities are future sacrifices of economic benefits that the entity is obliged to make to other entities. (Credit/Cr)

Question 3

Equity

Answer 3

Equity is the residual interest of assets after a deduction of liabilities. (Credit/Cr)

Question 4

Revenue/Income

Answer 4

Income are inflows or other monetary sources that have contributed to an increase in the owner’s equity. (Credit/Cr)

Question 5

Expenses

Answer 5

Expenses are consumptions or losses of economic benefits distributed by the owner resulting in a decrease in equity. (Debit/Cr)

Question 6

Cash Accounting

Answer 6

This is the process of recording transactions when cash is received or paid and is measured at the time as income, expenses, asset purchases or cash received from loans or additional capital.

Question 7

Accrual Accounting

Answer 7

This is the process of recording transactions as soon as they occur whether cash is involved or not. Income is recorded at the point of sale or provision of a service and expenses as soon as they occur.