Introduction to accounting

Question 1

asset

Answer 1

what the business owns.
present Economic resource.

Question 2

Current Assets

Answer 2

Assets that the company expects top turn to cash within a year.
for example: cash and bank balances, a trade receivable (debtor), Prepayment and inventory.

Question 3

Non-current Assets

Answer 3

All other assets, that could be expected to be used for long periods of time
For example:
- Tangible assets–> property plant and equipment
- Intangible assets –> cannot be seen or touched but have value

Question 4

Liabilities

Answer 4

A source of finance.

Question 5

Current liabilities

Answer 5

Due to be settled within 12 months, incurred due to the the firms normal operating activities.
Trade payables, short term loans, tax payable and accruals.

Question 6

Equity

Answer 6

what belongs to the owners.
Net assets = assets - liabilities
= capital

Question 7

Accrual and Matching Principle

Answer 7

Income is income, even if the goods and services have been delivered to the customer but not payed for.
Same is applied for expenses.

Question 8

Assets, liabilities and equity

Answer 8

Assets = liabilities + equity
liabilities+( assets-liabilities)

Question 9

According to accrual and matching principle

Answer 9

1) transactions should be recognised when they occur.

Question 10

Cash Accounting Principle

Answer 10

However according to cash accounting principle, transactions should be recognised by the date of the receipt or payment of cash.

Question 11

The accounting equation

Answer 11

Assets = liabilities + equity
assets = liabilities + capital + profit - drawings
Assets = liabilities+ capital + (income - expenses) - drawings
where,
equity = capital + profit - drawings
profit = income - expenses
re written as
assets - liabilities = equity

Question 12

Accounting terms

Answer 12

Historical costs –> the value of assets should be based on their acquisition cost
Dual Aspect –> each transaction has at least two effects on the accounting elements
Accurals–> income and expenses are recorded when earned (incurred)

Question 13

Measuring and recording transactions.

Answer 13

Record transactions in the journal and t accounts.
close off T accounts.
Prepare a trial balance.
Make year-end adjustments.

Question 14

Conceptual framework

Answer 14

The Conceptual Framework for financial reporting, by the International Financial Reporting Standards (IFRS), foundation for preparing and presenting financial statements. Principles that guide the development of accounting standards so financial information is useful for investors, creditors, and other stakeholders.
It ensures consistency, transparency, and comparability in financial reporting, making it easier for stakeholders to assess a company’s performance and financial position.

Question 15

Double entry book keeping

Answer 15

each transaction is recorded in at least two accounts. so accounting equation remains balanced.

Question 16

credit vs debut

Answer 16

it is expected that expenses and assets will have debit balances and income capital and liabilities will have credit balances.