Chp-1 ~ Evolution Of Accounting & Basic Accounting Terms Flashcards
What is a business transaction?
It is an economic activity of the business that changes its financial position.
It results in a change in values of some assets, liabilities or capital.
What are the features of a business transaction?
- concerned with the transfer or exchange of goods and services for money
- has dual or two aspects
- involves an economic activity
- is of two types - external and internal
- results in a change in the financial position of the firm.
What is an event?
It is the consequence or result of a transaction.
What is a voucher?
It is a document which provides authorisation to pay and on the basis of which the business transaction are, first of all, recorded in the books of accounts.
What is capital?
It refers to the amount invested by the proprietor in a business enterprise.
What are assets?
Anything which will enable a business to get cash or a benefit in future is an asset.
What are the characteristics of an asset?
- The resources must be valuable
- The resources must be owned by the business
- The resources must be acquires at a measurable money cost
What are non-current assets? Give examples.
These refer to those assets which are held for continues use in the business for the purpose of producing goods or services and are not meant for sale.
Eg: Land and Building, Plant and Machinery. Computer, Motor Vehicles, etc.
What are tangible and intangible assets?
Tangible assets are those which can be seen and touches. They have a physical existence. Eg: Plant and machinery, etc.
Intangible assets are those which do not have a physical existence. Eg: Goodwill, patents, copyrights, etc.
What are current assets?
Those assets which are meant for sale or which the management would want to convert into cash within one year. Eg: Debtors, Bills receivables, etc.
What is the liquidity of current assets?
Cash in hand, cash at bank, bills receivables, short term investments, debtors, stock, and prepaid expenses.
What are liquid assets?
Those which are either in the form of cash or can quickly be converted into cash, such as bills receivables, short terms investment, etc.
What are wasting assets?
Those which are consumer through being works or used such as mines. It includes assets which get exhausted with the lapse of time, such as patents, trade mark, etc.
What are fictitious or nominal assets?
assts which cannot be realised in cash or no further benefit can be derived from these assets.
