Ch 1 Flashcards
What is important for accounting purposes regarding business assets and liabilities?
They must be kept separate from personal assets and liabilities of the proprietor(s).
This separation is crucial for accurate financial reporting and legal compliance.
What are the two kinds of discount?
- Trade discount
- Cash (or settlement) discount
What is output sales tax?
It is charged on sales.
What is input sales tax?
It is incurred on purchases.
What does a company’s retention policy determine?
How long different kinds of information are retained.
What legislation regulates information stored about individuals?
Data Protection legislation.
What is a business’s prime objective?
Earning a profit.
Define profit.
The excess of income over expenditure.
How does accounting view the relationship between a business and its owner?
A business is treated as a separate entity from its owners.
What type of document would a business raise to give a customer a price for something?
A quotation.
Why should a business raise a goods received note?
It acts as notification that the goods have been received (complete and in good condition).
What is an invoice?
A demand for payment.
What information is usually shown on an invoice? List at least three items.
- Name and address of the seller
- Name and address of the purchaser
- Invoice number
- Date of the transaction
- Description of what is being sold
- Quantity and unit price
- Total amount including sales tax
What does E&OE on an invoice mean?
Errors and omissions excepted.
What is input tax?
Sales tax paid on purchases.
What is output tax?
Sales tax charged on sales.
What is the accounting equation?
Assets = Liabilities + Equity.
What are the two main types of business transactions?
- Cash
- Credit
What is the purpose of the double entry bookkeeping system?
To ensure that all financial transactions are recorded accurately.
What are assets?
Items belonging to a business and used in the running of the business.
What are non-current assets? Give an example.
Assets such as machinery or office premises.
What are current assets? Give two examples.
- Inventory
- Accounts receivable
What is the definition of a business?
An organization that aims to make a profit for its owner(s).
What is vital for understanding the practical aspects of cash, credit, and payroll transactions?
A thorough grasp of double entry and the basics of accounting.
