Chapter 30 - Intro to Bookeeping Flashcards
What is bookkeeping concerned with?
Recording, Classification and Organising of all financial transactions by a business.
What is a transaction?
Any agreement between two people to carry out a business activity
Why is it important to keep records of a firm’s transactions?
- Forget to pay a supplier
- Forget to collect money you are owed
- Forget to pay an important bill
Creditor?
You owe
Debtor?
Owe you
Why do we keep records of transactions?
- Know how much money you have
- Know how much we owe
- Know how much we are owed
What is a ledger?
- Where a business keeps records
- Its divided into accounts and each transaction is recorded in the accounts
What is double entry bookkeeping?
- All transactions have a twofold effect
- Requires a debit and credit entry when recording transactions
- Works on principle that whatever value is given, must also be received
What is a debit?
That a transaction has been received into an account. Account shows the assets and expenses.
What is a credit?
That a transaction has been given by an account. Account shows the liabilities and gains.
What are assets?
Things a business owns
What are fixed assets?
Assets that stay in a business for more then a year
What are current assets?
Assets that will usually change in value during the year (or be removed)
What are liabilities?
Things a business owes
What are long term liabilities?
Money owed by the firm that must be paid back over a long period of time (+5 years)
