Chapter 1

Question 1

What are the 2 types of businesses?

Answer 1

Trading business and service business

Question 2

What are the different forms of business ownership?

Answer 2

Sole proprietorship (SP), limited liability partnership (LLP) and private limited company (PLC) More info on page 5 & 6 of textbook

Question 3

Define shares

Answer 3

Shares are the units of business ownership

Question 4

Define collaterals

Answer 4

Collaterals are assets that lenders can seek to get their money back if the borrower does not repay their loan.

Question 5

What does it mean when a LLP or a PLC is wound up?

Answer 5

An LLP or PLC is wound up when all assets are sold to pay off all liabilities and expenses, with any remaining monies distributed to its partners or shareholders.

Question 6

What does it mean when a LLP or a PLC is struck off?

Answer 6

An LLP or a PLC is struck off from the register if it has ceased operation, obtained consent from majority of owners, has no existing and liabilities and is not involved in any legal proceedings.

Question 7

What does the Accounting Corporate Regulatory Authority (ACRA) do?

Answer 7

In Singapore, the ACRA establishes and administers a repository of documents and information relating to business entities.

Question 8

Define stamp duty

Answer 8

Stamp duty is a tax related to the transfer of property, stocks and shares.

Question 9

Define statutory and regulatory

Answer 9

Statutory refers to laws passed by the government while regulatory refers to rules issued by an authority appointed by the government.

Question 10

Who are stakeholders?

Answer 10

Stake holders are groups of people who will make use of information about the business to make decisions.

Question 11

Name the 8 types of stakeholders

Answer 11

Owners and shareholders, managers, employees, lenders, suppliers, customers, government and competitors (More on page 8 of textbook)

Question 12

What are the accounting theories? (12)

Answer 12

Accounting entity, accounting period, accrual basis of accounting, consistency, going concern, historical cost, matching, materiality, objectivity, prudence, revenue recognition

Question 13

Explain the accounting theory of accounting entity.

Answer 13

The activities of a business are separate from the actions of the owner. All transactions are recorded from the point of view of the business.

Question 14

Explain the accounting theory of accounting period.

Answer 14

The life of a business is divided into regular time intervals.

Question 15

Explain the accounting theory of accrual basis of accounting.

Answer 15

Business activities that have occurred, regardless of whether cash is paid or received, should be recorded in the relevant accounting period.

Question 16

Explain the accounting theory of consistency.

Answer 16

Once an accounting method is chosen, this method should be applied to all future accounting periods to enable meaningful comparison.

Question 17

Explain the accounting theory of going concern.

Answer 17

A business is assumed to have an indefinite economic life unless there is credible evidence that it may close down.

Question 18

Explain the accounting theory of historical cost.

Answer 18

Transactions should be recorded at their original cost.

Question 19

Explain the accounting theory of matching.

Answer 19

Expenses incurred must be matched against income earned in the same period to determine the profit for that period.

Question 20

Explain the accounting theory of materiality.

Answer 20

Relevant information should be reported in the financial statements if it is likely to make a difference to the decision-making process.

Question 21

Explain the accounting theory of monetary.

Answer 21

Only business transactions that can be measured in monetary terms are recorded.

Question 22

Explain the accounting theory of objectivity.

Answer 22

Accounting information recorded must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases.

Question 23

Explain the accounting theory of prudence.

Answer 23

The accounting treatment choses should be the one that least overstates assets and profits and least understates liabilities and losses.

Question 24

Explain the accounting theory of revenue recognition.

Answer 24

Revenue is earned when goods have been delivered or services have been provided.