Intro To Accounting

Question 1

What are the three main activities involved in accounting?

Answer 1

1. Identification: Accountants identify economic events and transactions related to the business
2. Recording: Accountants summarise and record these transactions
3. Communication: They then prepare accounting reports and analyse this to interpret for users. Explain why e.g. salaries are too high, increase in revenue… In order to make the business profitable.

Question 2

Going concern

Answer 2

The entity will continue in operation for the foreseeable future

Question 3

Accrual

Answer 3

Revenue and costs must be recognised as they are earned or incurred, not as money is received or paid.

Question 4

Materiality

Answer 4

Information is material if its omission or misstatement could influence the economic decision of users.