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BUS MAN/ ACCOUNTING SEM 2 > ACCOUNTING UNIT 1 > Flashcards

ACCOUNTING UNIT 1 Flashcards

1
Q

What is the nature and purpose of accounting?

A

It is about managing and making decisions and how to best manage them
From
Managing staff
Managing customers or clients
Managing inventory and suppliers
Managing finances
T/F need infomation

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2
Q

What is the accounting management information system?

A

It involves the collecting, sorting, classifying and recording of financial data to produce and report financial information to assist business owners in decision making

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3
Q

What does EFT stan for

A

Electronic Funders Transfer

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4
Q

What does EFTPOS stand for

A

Electronic Funds Transfer Point of Sale

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5
Q

Is EFT a cash or credit transaction?

A

cash

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6
Q

Is a cheque Butt a source document?
Is it a cash or credit transaction?

A

Yes it is a source document
Cash transaction

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7
Q

Is a cheque a source document?

A

NO!!

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8
Q

Is an invoice a source document?
If yes, how do u know
Is it a cash or credit transaction?

A

Yes it is, it contains the invoice number or the terms ( 6/7 indicates 6% discount if paid in 7 days)

CREDIT

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9
Q

Is a receipt a source document
If yes how can u tell? (evidence)
Is it a cash or credit transaction?

A

YES IT IS
Because of the receipt number and the received on
CASH TRANSATCTION

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10
Q

Can u use the evidence of “ Tax invoice” in your answer?

A

NO!
This is a legal requirement that records the including of GST

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11
Q

Is credit card a cash or credit transaction?

A

Cash due to paying the business but the obligation is between the bank and the owner so that’s why its a cash

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12
Q

Definition of source documents

A

Documents that provide both the EVIDENCE tat a transaction has occurred and the DETAILS of the transaction itself

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13
Q

What order is the accounting process

A

SOURCE DOCUMENTS –> RECORDS –> REPORTS –> ADVICE

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14
Q

Def for recording (accounting process)

A

sorting, classifying and summarisng the data contained in the source documents so that it is more useable

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15
Q

DEF for reporting (accounting process)

A

the preparation of financial statements that communicate financial information to the owner

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16
Q

DEF for advice (accounting process)

A

the provision to the owners of a range of options available to their aims/objectives together with recommendations as to suitability of those aims/ objectives

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17
Q

ACCOUNTING PROCESS IS

A

the process of taking FINANCIAL DATA and converting it into FINANCIAL INFO in order to be able to make decisions

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18
Q

Is a MEMO a source document
If yes how can u tell? (evidence)
Is it a cash or credit transaction?

A

YES H/W it is not a cash or credit transaction instead it is an internal transaction

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19
Q

Is a BANK STATEMENT a source document
If yes how can u tell? (evidence)
Is it a cash or credit transaction?

A

NO it is a back up document

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20
Q

Accounting equation

A

Assets = liabilities + Owners Equity

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21
Q

Current assets definition

A

A present econmic resource controlled by the entity (as a result of past events) that is reasnably expected to be converted to cash, sold or consumed within the next 12 months after the end of the reporting period

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22
Q

NON CURRENT ASSESTS

A

present economic resource controlled by the entity ( as a result of past events) that is not held for resale and is reasonably expected to be used for more than the next 12 months after the end of the reporting period

23
Q

Current liability definition

A

a present obligation of the entity (arising from past events) that are reasonable expected to be settled with a TRANSFER OF AN ECONOMIC RESOURCE withi the next 12 months after the end of the reporting period

24
Q

Non- current Liabilities

A

a present obligation of the entity (arising from past events) that are NOT EXPECTED to be settled with a transfer of an economic resource within the next 12 months after the end of the reporting period.

25
Q

EXAMPLE CURRENT ASSETS

A

inventory of supplies (stock
Accounts recieveable
Bank

26
Q

EXAMPLE NON- CURRENT ASSETS

A

Equipment
Vehicle
premises

27
Q

EXAMPLE OF CURRENT LIABILITIES

A

Loan (due in 6 months)
Bank (overdraft)
Accounts payable

28
Q

EXAMPLES OF NON CURRENT LIAILITIES

A

Loan in over 12 months

29
Q

WHAT IS OWNERS EQUITY

A

Residual interest in the asset of the entity after the liabilities are deducted
= what is left over from the firm once the liabilities are met or the owner claim on the firms assets

30
Q

What is accounting entity assumption

A

The assumption that the accounting records of asset, liabilities and business activities of the entity are kept completely separate from those of owner of the entity as well from those of other entities

31
Q

What goes on a balance sheet first for assets

A

Bank
Accounts Receivable
Inventory of supplies

32
Q

What goes on a balance sheet first for liabilities

A

Accounts payable
mortgage
Bank

33
Q

What is the impact of transactions o the accounting equation?

A

Every transaction that a business’ is involved in affects at LEAST 2 items in the accounting equation with the equation still being able to balance.

34
Q

What is a transaction>

A

an exchange of a good or service with another party

35
Q

What is accounts receivable?

A

a customer to whom a service has been provided on credit and the amount is still owing for sales

35
Q

What is inventory of supllies

A

this is a store of goods/ supplies on hand that the business can use in the process of providing the service their business delivers

36
Q

Accounts payable is

A

a supplier for whom goods have been purchased on credit and the amount still owing for those products

37
Q

Mortgage is

A

a loan taken out from a financial institution for the purpose of buying a property/ premises

38
Q

Liquidity

A

the ability of the business to meet its short term debts as they fall due

39
Q

Stability

A

the ability of a business to meet its debt and continue operation in the long term

40
Q

Working capital ratio
(formula and what it measures)

A

Current Assets/ Current liabilities
x:1 ratio
MEASURES LIQUIDITY ( whether the business has sufficient economic resources)

41
Q

What is the purpose of a balance sheet?

A

It is a tool used to determine key financial indicators that can measure stability and liquidity of a business

42
Q

Internal finance Capital
AD AND DIS

A

AD
No set repayment structure
No interest
Owners willing to wait for a profit b/f expecting a dividend
DIS
Limited to the resources of the owner(s)

43
Q

External finance TRADE CREDIT (accounts payable)
WHAT IS IT

A

> a form of external finance offered by some suppliers which allows customers to purchase goods and pay @ a later date
d

44
Q

External finance BANK OVERDRAFT
WHAT IS IT

A

Finance provided by a bank that allows the account holder to withdraw more than their current balance

45
Q

External finance BANK OVERDRAFT
ADVANTAGES

A

Available immediately facility is est
Flexible and used for seasonal variations

46
Q

External finance BANK OVERDRAFT
DISADVANTAGES

A

High interest usually to an O/D
can be recalled in short notice

47
Q

External finance
TERM LOANS
WHAT IS IT

A

provided by banks and other lenders for a specific purpose and repaid over a set time

48
Q

External finance TERM LOANS
ADVANTAGES

A

Can purchase more expensive assets
if secured lower interest rate

49
Q

External finance TERM LOANS
DISADVANTAGES

A

Interest is charged
Must be paid back in line with contractual terms (mortgage)

50
Q

What is a mortgage

A

a loan that is secured against a property

51
Q

EXTERNAL FINACE TRADE CREDIT ADVANTAGES

A

Immediate access to goods/ service
Can generate sales b/f $$

52
Q

EXTERNAL FINANCE TRADE CREDIT
DISADVANT

A

only used with that supplier
late fees may be incurred

53
Q

Debt ratio
FORMULA
what does it measure????????

A

Total Liabilities/ total assets X 100
MEASURES STABILITY

BUS MAN/ ACCOUNTING SEM 2 (5 decks)

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