Introduction to accounting

Question 1

what is book-keeping

Answer 1

the detailed recording of all financial transactions of a business

Question 2

What is accounting

Answer 2

Bookkeeping records to prepare financial statements and to assist in decision making

Question 3

Why is it necessary to prepare financial stamens at regular intervals

Answer 3

-to calculate the profit or loss earned by the business during a period of time
-to know the financial position of the business at regular intervals
-to be able to measure the progress of the business over several periods
-to assist in decision making and future planning

Question 4

What is assets

Answer 4

Anything owed or owing to the business

Question 5

What is liabilities

Answer 5

Anything owed by the business

Question 6

What is capital

Answer 6

The total resources provided by the owner and represent what the business owes the owner

Question 7

What’s the accounting equation

Answer 7

Assets = capital + liability

Question 8

What is trade payables

Answer 8

The amount the business owes to the credit suppliers of goods

Question 9

What is trade receivables

Answer 9

The amount owed to the business by its credit customers

Question 10

State the purposes of measuring business profit and losses

Answer 10

-to compare the profits with previous years
-to show revenue and expenditure over the year
-to show the financial statements to stakeholders like shareholders

Question 11

Explain how a contra entry is treated in the ledger accounts

Answer 11

-the balance on a purchase ledger account is transferred to an account for thr same business in the sales ledger
-purchause ledger account is debited and th4 sales ledger is credited