chapter 2 Flashcards
what is cash transactions
payment is made immediately during a cash sale or purchase
what are credit transactions
payment is delayed or postponed during a credit sale or purchase
what is accounting entity theory
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
what is the monetary theory
only business transactions that can be measured in monetary terms are recorded
what are source documents
provides evidence to capture occurrence of a transaction. The source document contains the details of a business transaction that are needed for recording
what is the historical cost theory?
transactions should be recorded at their original cost
what is the objectivity theory?
accounting information recorded must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases
what is the purpose of a receipt
acknowledges payment received from customers immediately
what is the purpose of remittance advice
informs credit supplier that payment by cheque has been made for a specific invoice
what is the purpose of invoice
informs credit customers of the amount owed
what is the purpose of credit notes
reduces the amount owed by credit customers who were previously overcharged or after goods were returned
what is the purpose of debit notes
increases the amount owed by credit customers who were previously undercharged
what is the purpose of payment voucher
processes payments to credit suppliers which must be approved by authorised personnel and must be supported by original supplier’s invoice
what is the purpose of bank statement
checks and tallies against the business records of its cash at bank account
