Ch-5: Accounting Flashcards
Define:
Book-keeping
Book keeping is the the recording of accounting data in books of account
Define:
Double Entry System
A system where each transaction is entered twice, once on the debit side and once on the credit side
What are the objectives of accounting?
Letting people and organisations know:
* If they are making a profit or a loss
* What their business is worth
* How much cash they have
* How much they are owed
* How much they owe to someone else
State the purposes of measuring business profit and loss
The purpose of the profit and loss account is to show whether a business has made a PROFIT or LOSS over a financial year
State the users of accounting information
- Managers
- Owner(s)
- The Bank
- Tax inspectors
- Investors
What is the accounting equation?
- Assets = Capital + Liabilities
Define:
Assets
Resources owned by the business
Define:
Current Assets
Assets consisting of cash, inventory, or items having a shorter life
Define:
Non current Assets
Assets having long life and are bought with the intention to use in the business but not for resale
Define:
Capital
The total resources supplied to a business by it’s owner
Define:
Liabilities
Total money owed for goods and services received or assets supplied to the business
Define:
Current Liabilities
Liabilities to be paid in the near future
Define:
Non Current Liabilities
Liabilities not having to be paid for in the near future
Give examples of:
Assets
- Inventory
- Cash at hand
- Cash in bank
Give examples of:
Non-Current Assets
- Motor vehicle
- Computer
- Land and buildings
