CHAPTER 2 POA Flashcards
What are the two types of business transactions?
cash and credit transaction
What is the definition of a cash transaction?
payment is made at the same time or immediately during a cash sale or purchase.
What is the definition of a credit transaction?
payment is delayed or postponed during a credit sale or purchase.
What are the types of source documents?
- receipt.
- invoice.
- credit note.
- debit note.
- payment voucher/ remittance advice.
- bank statement.
What is the purpose of a receipt?
sale/ purchase of goods/services on cash basis.
What is the purpose of an invoice?
sale/ purchase of goods/services on credit basis.
What is the purpose of a credit note?
return of goods or overcharge of goods/services
What is the purpose of a debit note?
undercharge of goods/services
What is the purpose of a payment voucher/ remittance advice?
payment of goods/services to suppliers
What is the purpose of a bank statement?
bank charges/ direct credit transfer/ direct deposit
State the accounting information system
Identify & Record -> Adjust -> Report -> Close
State the source documents cycle
Source Documents -> Journal -> Ledger -> Trial Balance -> Financial Statements
What are the accounting theories used for chapter 2?
monetary theory, objectivity theory, historical cost theory
State the monetary theory
According to the monetary theory, only business transactions that can be measured in monetary terms are recorded.
State the objectivity theory
According to 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.
