Cycle Test 25 March

Question 1

What is bookkeeping?

Answer 1

Bookkeeping is the first step in the accounting process

Question 2

How many steps does the bookkeeping process have?

Answer 2

4 Steps

Question 3

What are the 4 steps in the bookkeeping process?

Answer 3

The recording of data

Data

Question 4

What is the definition of a transaction?

Answer 4

A transaction is any business action or opportunity where money is involved

Question 5

What is the definition of accounting?

Answer 5

Accounting is the processing of data to provide information in such a way that meaningful decisions can be based on it

Question 6

What parties would be interested in a businesses account?

Answer 6

Within the business: Owners, Managers, employees

Outside the business: Bank managers, wholesalers, investors

Question 7

From whose point of view do we do accounting?

Answer 7

The businesses view

Question 8

What is an asset?

Answer 8

Something that the business posses or is a belonging of the business

Question 9

What is a non-current asset? Also known as a fixed asset

Answer 9

A possession of the business that has a life span of longer than year.

Question 10

What is a current asset? Also known as a floating asset

Answer 10

Possessions of the business that increase or decrease in value, within the span of one year, of which value varies a lot or it is to be sold again

Question 11

What is a liability?

Answer 11

Liabilities are money owed by the business to other concerns and which should be paid back at a specific time

Question 12

When are liabilities created?

Answer 12

When the business:
Borrows money
Buys assets on account
Pays for expenses on account

Question 13

What is the owners contribution to the business called?

Answer 13

Owners capital, which is apart of owners equity

Question 14

What are the funds called when money is taken out of the business?

Answer 14

Drawings

Question 15

What is the accounting equation?

Answer 15

Assets = Owners equity + Liabilities 
A = O + L

Question 16

How is profit calculated?

Answer 16

By deducting the expenses from the income

Question 17

How is income received?

Answer 17

Income is received through the sale of goods or by services rendered

Question 18

What is a service business?

Answer 18

Where income is received through services rendered

Question 19

What is a commercial business?

Answer 19

Where profit is generated by buying goods at a lower price than they are being sold

Question 20

What happens to owners equity when income is received?

Answer 20

Owners equity then increases

Question 21

What happens to owners equity when an expense needs to be paid?

Answer 21

Owners equity then decreases

Question 22

What happens when the expenses exceed the income?

Answer 22

The business is then at a loss

Question 23

How do you work out profit?

Answer 23

Net profit = Income - Expenses