Chapter 1: Introduction to Accounting Flashcards
Accounting
The continuous process of: Recording, Classifying, Summarizing, and Presenting the information to the Manegment for Decision Making
Transactions
The recorded financial activities that involve both Receiving and Giving
Bookkeeping
The systematic recording of Transactions
Financial Statements
The statements prepared at the end of the year to present information to the manegment
Types of Financial Statements
Income Statements: Profit or Loss
Balance Sheet: Financial Position
Credit Transaction
The transactions that involve paying or receiving money on a Later Date
Stake Holders
The people or organizations whose economical interest is attached with the business
Stake Holders of Accounting Information
Owner/Shareholders: Profit
Managers: Performance and Improvement
Employees: Better Wages or Salaries
Investors: Profitable and Safe?
Suppliers: Able to repay for supplies?
Government: Taxes
Lenders: Safe to lend?
Asset
The things or properties owned by the business
Types of Assets
Non-current: The assets that benefit the business for more than a year
Current: The assets that can be converted into cash within a year
Examples of Assets
Non-current: Machines, Vehicles, Buildings…
Current: Cash in Hand, Cash at Bank, Inventory, Trade Receivables, Other Receivables
Intangible Assets
The assets that cannot be seen or touched
Example of Intangible Assets
Goodwill: The popularity and advantage of one business over the other
Liability
The Loans and Owings of the business
Types of Liability
Non-cuurent: The loans and debts repayable after a year
Current: The owings and debts repayable within a year
Examples of Liability
Non-current: Bank Loans
Current: Bank Overdraft, Trade Payables, Other Payables
Bank Overdraft
The money the business owes to the bank when they withdraw more than their account has, and the balance available is below zero
Trade Payables
Suppliers whom the business owes them money
Other Payables
Non-suppliers whom the business owes them money
Trade Receivables
Customers who owe the business money
Other Receivables
Non-customers who owe the business money
Capital (Owner’s Equity)
The money invested into the business by the owner (Liability)
Drawings
The money withdrawn by the owner from the business for personal use (Asset)
Accounting Equations
Asset = Capital + Liability
Capital = Asset - Liability
Liability = Asset - Capital
