Introduction to accounting

Question 1

What is modern definition of accounting?

Answer 1

It is the act of identifying, measuring and communicating economic information to permit informed judgement and decisions by users of that information.

Question 2

Who created accounting equation?

Answer 2

Luca Pacioli

Question 3

DEBIT IS THE DESTINATION

Answer 3

CREDIT IS THE SOURCE

Question 4

Easy way to remember DEALER EQUATION

Answer 4

DIVIDENDS + EXPENSES + ASSETS = (DR)
LIABILITIES + OWNER’S EQUITY + REVENUE (CR)

Question 5

Who is the father of accounting

Answer 5

Luca Pacioli (Luca Patcholi—- pronounciation)

Question 6

Main functions in Accounting? 8

Answer 6

Identifying
Measuring
Recording
Classifiying
Summarising
Analysing
Interpreting
Communicating

Question 7

For economic institutions use the term “entity”?

Answer 7

For companies, organistions etc during financial transactions use the term entity.

Question 8

Accounting is a means of communication?

Answer 8

Accounting is a means of communication like a language for conveying accounting information to USERS to enable them to make reasonable decisions.

Question 9

Difference between Accounting and bookkeeping?

Answer 9

Read book page 1.5

Question 10

What is Accrual Method?

Answer 10

Accrual accounting is an accounting method that records revenues and expenses before payments are received or issued. In other words, it records revenue when a sales transaction occurs. It records expenses when a transaction for the purchase of goods or services occurs.

Question 11

English approach to accounting?

Answer 11

Three categories
Personal A/C
Real A/C
Nominal A/C

Question 12

American approach for accounts?

Answer 12

Capital — Cr
Asset — Dr
Liabilities— Cr
Expenses — Dr
Income — Cr
Drawings — Dr

Question 13

Debit Aspect

Answer 13

Usually Assets/Expenses and losses come in the debit part.

Question 14

Credit Aspect

Answer 14

Usually Income liabilities and capital

Question 15

Why is trial balance used before summarizing?

Answer 15

Trial balance is used to check the ledger for any arithmetic errors and maintain accuracy

Question 16

Personal accounts overview

Answer 16

Contains
Natural accounts– Individual accounts like Susan’s A/C
Artificial Accounts– SBI and corporations accounts etc
Representative Accounts — Prepaid Insurance and Outstanding salary.

Debit the receiver (receives from business)
Credit the giver (gives to business)

Question 17

Current Assets?

Answer 17

List of Current Assets.
#1 – Cash and Cash Equivalents.
#2 – Marketable Securities.
#3 – Accounts Receivables.
#4 – Inventory.
#5 – Prepaid expenses.
#6 – Non-trade Receivables.
#7 – Other Current Assets.

Question 18

Another name for accounting equation?

Answer 18

Balance sheet equation.

Question 19

Increase and decrease of credit and debit

Answer 19

Salary a/c to cash expense increasing debit asset decreasing credit

Question 20

When liability is increased in account eg a bank loan the liability increases so does the debit as the cash is obtained

Question 21

Wages/Salary/Expense outstanding is a liability

Answer 21

Salary is a expense

Question 22

prepaid rent is a what?

Answer 22

Asset in accounting equation

Question 23

What is accrued interest

Answer 23

What Is Accrued Interest? In accounting, accrued interest refers to the amount of interest that has been incurred, as of a specific date, on a loan or other financial obligation but has not yet been paid out.

Question 24

The revenue centre

Answer 24

Is a part of the organisation that earns sales revenue