BS5- Accounting Concept

Question 1

Define accounting

Answer 1

the process or work of keeping financial accounts.

Question 2

What are the two main categories of accounting?

Answer 2

The two main accounting methods are cash accounting and accrual accounting.

Question 3

What does financial accounting concentrate on?

Answer 3

The focus of financial accounting is on summarizing and reporting a business’s financial position to entities outside the business with a vested interest, such as stockholders, creditors, government agencies and suppliers.

Question 4

What does managerial accounting concentrate on?

Answer 4

focuses on what it takes to keep a business operating profitably. Tracking and projecting revenue and expense needs is critical.

Question 5

What are the 7 principles of accounting?

Answer 5

Consistency 
Matching 
Objectivity 
Realisation 
Prudence 
Going concern 
Materiality

Question 6

What does GAAP stand for and what is it?

Answer 6

Generally Accepted Accounting Principles

Question 7

Explain the MATCHING accounting principle

Answer 7

The matching principle requires that revenues and any related expenses be recognized together in the same reporting period.

Question 8

Explain the CONSISTENCY accounting principle

Answer 8

the Consistency Principle means that once your organization, or, more specifically, your bookkeeper or accounting department, adopts an accounting principle or method of documenting and reporting information, that method has to be used consistently moving forward.

Question 9

Explain the OBJECTIVITY accounting principle

Answer 9

An accounting principle that states that a company’s financial information must be based on verifiable data.