Chaper 2 - Accounting Concepts

Question 1

What is the first step in the 5 flow of information steps

Answer 1

Step 1 - transactions generate primary documents I.e credit sales create sales invoices

Question 2

What is the second step in the 5 steps of flow of information

Answer 2

Primary documents entered into books of prime entry I.e sales invoices entered into sales day book

Question 3

What is the third step of the 5 flow of information steps

Answer 3

Totals from books of prime entry entered into general ledger using double entry I.e sales day book posted to receivables account and the sales account

Question 4

What is the fourth step in the 5 flow of information steps

Answer 4

General ledger accounts closed off at end of accounting period

Question 5

What is the fifth step in the five steps of flow of information

Answer 5

Balances on general ledger accounts transferred to trial balance to check that it balances at this stage

Question 6

What does the statement of profit or loss show

Answer 6

Last 12 months shows all income and expenses

Question 7

What does the statement of financial position show

Answer 7

This is for the current period

Shows all assets and liabilities of the business and the net amount owed to the owner

Question 8

Gross profit

Answer 8

Income - cogs

Question 9

Net profit

Answer 9

Income - all expenses