Chapter 1: Introduction to Accounting

Question 1

Relevance

Answer 1

A fundamental quality stating that in order to be relevant, accounting information must be able to influence decisions.

Question 2

Materiality

Answer 2

Something which has the potential to alter the decisions that users make.

Question 3

Faithful Representation (Reliability)

Answer 3

A fundamental quality stating that accounting information should be complete, neutral and free from error.

Question 4

Comparability

Answer 4

Quality which helps users ability to identify similarities between items of information.

Question 5

Verifiability

Answer 5

Something that can be checked and verified.

Question 6

Timeliness

Answer 6

Being available early enough to be of use to the users.

Question 7

Understandability

Answer 7

Clearly set out to facilitate understanding

Question 8

Accounting

Answer 8

The process of identifying, measuring and communicating financial information to permit informed judgements and decisions by users of the information.

Question 9

Not-for-profit organisation

Answer 9

An organisation whose main aim is not to make a profit, but to achieve some other clear goal, usually of a social nature.

Question 10

Equity/Capital

Answer 10

The share of the business which represents the owners interests

Question 11

Sole Proprietorship

Answer 11

An individual in business on his or her own account.

Question 12

Types of Accounting

Answer 12

Financial: Preparing reports and statements
Management: Providing Information relevant to decision making

Question 13

Partnership

Answer 13

The relationship that exists between two or more persons carrying on a business with a view to profit.