Chapter 2 (Accounting Info System)

Question 1

Accounting entity theory

Answer 1

The activities of a business are separate from the actions of the owner and all transactions are recorded from the point of view of the business

Question 2

Accounting period theory

Answer 2

It is applied where the life of a business is divided into regular time intervals

Question 3

Going concern theory

Answer 3

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

Question 4

Monetary theory

Answer 4

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

Question 5

Cash transaction and credit transaction

Answer 5

In a cash transaction, payment is made at the same time or immediately during a cash sale or purchase

In a credit transaction, payment is delayed or postponed during a credit sale or purchase

Question 6

4 stages of the accounting cycle

Answer 6

1) Identify source documents and record transactions in journal and ledger daily

2) Any adjusting entries are recorded in the journal and posted to the ledger at least once in a financial year

3) Based on the adjusted trial balance, the financial statements are prepared, reports are prepared at least once in a financial year

4) Close all accounts after finalisation of financial statements once at the end of the financial year

Question 7

5 accounting process of the accounting information system

Answer 7

Source documents > Journal > Ledger > Trial balance > Financial statements