Intro to Accounting

Question 1

What are some users of financial information?

Answer 1

• Owners/Investors
• Management
• Creditor
• Government
• Employees/ Labour Unions
• Customers

Question 2

What are the three natures of businesses?

Answer 2

• Manufacturing
• Service
• Trading (Wholesale and Retailer)

Question 3

What is the Accounting Entity?

Answer 3

The business is an entity separate from the owner(s).

Question 4

What is the Monetary Assumption?

Answer 4

All transactions affecting the business are recorded in the common monetary unit.

Question 5

What is the Historical Cost?

Answer 5

Assumes that business transactions are recorded in terms of their cost at the time the transaction occurred.

Question 6

What is the Principle of Conservatism/Prudence?

Answer 6

When determining the periodic profit for a business, accountants traditionally tend towards caution with profits being recognized only when they have actually been earned. Provision must be made to account for all probable losses.

Question 7

What is the Continuity/Going Concern?

Answer 7

The business will continue to operate for a long time and will not be selling its assets in the near future.

Question 8

What are the key aspects of business ethics? (8)

Answer 8

• Integrity
• Fairness
• Respect for Stakeholders
• Transparency
• Compliance with local Laws and Regulations
• Corporate social responsibility
• Conflicts of Interest
• Accountability