Chapter 1 & 2 Flashcards
How is bookkeeping different from accounting?
Bookkeeping involves only the recording of business transactions. Accounting is the process of recording, summarising, analysing, interpreting and reporting the financial information of an organisation.
State and explain the 2 major roles of accounting in business?
Stewardship - Careful and responsible management of the business’ financial information entrusted to them.
Decision making - Help people who are interested in the business make decisions relating to the business.
Name 2 internal stakeholders, and explain the decisions made by them.
Managers - Decide how to plan, manage, control and operate the business.
Employees - Decide whether to continue working for the business or not. Want to know if the business if profitable, to evaluate their career prospects in the company.
Name 2 external stakeholders, explaining the decisions made by them.
Shareholders & Investors - Evaluate to see if they should increase or decrease their investment.
Banks and lenders - Decide whether to grant loans or not.
Suppliers - Decide whether to grant the business credit or not. Evaluate to see if the business could pay for its credit purchases.
Government - Decide how much tax to collect from business.
State the accounting entity concept.
The accounting entity concept states that the business is a separate entity from its owner and that all transactions are recorded from the business point of view.
State the monetary concept.
The monetary concept states that only business activities that can be measured in monetary terms are recorded.
What are the 2 professional ethics in accounting?
Integrity & Objectivity.
