Bookkeeping Theory

Question 1

Definition of Double Entry Accounting?

Answer 1

Double Entry Accounting is known as your debits and credits. The double entry accounting is the base of accounting system that is still implemented society today.

Question 2

Difference between Users of Accounting and Uses of Accounting?

Answer 2

Users of Accounting:
Investors
Employees and Unions
Lenders
Suppliers and creditors
Customers
Government
General Public
Management

Uses of Accounting:
Check how tge financial of the business is doing good or bad
Business is at a profit or loss
Which products/activities have been profitable
Is cost of production reasonable or excessive.

Question 3

What doea GAAP stand for?

Answer 3

General Acceptable Accounting Practice

Question 4

What does IFRS stand for?

Answer 4

International Financial Reporting Standard

Question 5

What does IFRS stand for?

Answer 5

International Financial Reporting Standard

Question 6

What is IFRS?

Answer 6

Books are done according to the law of accounting

Question 7

Characteristics of IFRS?

Answer 7

Relevance - infomation that is able to influence economic decisions of users

Faithful Representation - infomation that is complete, neutral and free from error.

Comparability - infomation that is compared from one financial period to the next.

Understandability - infomation that is understandable to users who have knowledge of the business.

Timeliness - infimation that is privided in the time period which influence economic decisions of users

Verifiability - infomation through which different observers reach same financial records.

Question 8

Difference between Financial Accounting and Management Accounting?

Answer 8

Financial Accounting (Stephen):
Report to external parties - SARS
Report on past events of business
Infomation must be verifiable - Regulated by IFRS
Only measures financial data
Report on entire organisation

Management of Accounting (Mark):
Report to internal parties
Report on future events of business
Infomarion is relevant and flexible
Measures financial and operation performance
Can focus on specific areas of the business

Question 9

What do management accounting use the infomation for?

Answer 9

Planning
Organising
Leading
Controlling

Question 10

Name the accounting cycle?

Answer 10

Transaction takes place
Source document used to summerise the transaction
Journals used to summerise the source documents
General ledger used to summerise the Journals
Trial Balance used to summerise the Journals

This process is done on a monthly basis

Question 11

Assets

Answer 11

Possessions of the business (non current, current assets)

Question 12

Liabilities

Answer 12

Amounts that the company or individual owes

Question 13

Owners Equity

Answer 13

The owners net investments in business OE = Assets - Liabilities

Question 14

Double Entry

Answer 14

For every debit there is a corresponding credit

Question 15

Mortgage Loan

Answer 15

Money borrowed in order to purchase property

Question 16

Investments

Answer 16

Money tied up for a period of time tobearn higher return

Question 17

T Accounts

Answer 17

Is used for working to show debits and credits

Question 18

Balance sheet

Answer 18

Statement showing tge financial position of the business

Question 19

Captial

Answer 19

Money invested by the owner

Question 20

Drawings

Answer 20

Money withdrawn by the owner from the business for personal use

Question 21

Debtor

Answer 21

Person who you sold to on credit

Question 22

Debt

Answer 22

Owe someone money