Introduction To Accounting Ch1 Unfinished

Question 1

Financial accounting

Answer 1

The bookkeeping of businesses’ past transactions.

From the transactions recorded, final accounting statements are prepared showing what happened over a period of time and the financial position of the business on a particular date.

Question 2

Management accounting

Answer 2

Where the financial information is used internally by managers so that they can make decisions that will affect the future of the business.

Question 3

Accounting

Answer 3

Accounting is the production of financial information regarding profit and non- profit making enterprises.

Question 4

Purpose of accounting

Answer 4

-show the performance and financial position of an enterprise
-can be used by stakeholders to assess and/ or make decisions for the good of the enterprise.
-financial statements are necessary when loans and grants are required.
-financial statements required when assessing a business for tax purposes

Question 5

Characteristics of financial accounting

Answer 5

CURR

relevant - info given must be precise, as required by the user

Reliable - info given must be reliable and verified by an auditor or supported by a director.

Comparable - financial info given must be consistent from year to year so that its results can be compared either within the business or between similar businesses

Understandable- user must be clearly able to understand the financial information

Question 6

intangible asset

Answer 6

Assets which are invisible but saleable

-usually written off (amortised) to the profit and loss account over a number of years, eg goodwill, patents
/ eg pharma company cured malaria - R&D spent billions - patent that formula so no one else can copy it ( depreciated )

Question 7

Balance sheet

Answer 7

Assets and liabilities
-this shows the financial position of a business on a certain date
-shows assets, liabilities and capital of a business

Question 8

Goodwill

Answer 8

Intangible asset in the balance sheet
-money paid for the reputation or location of a business
-should be written out of the accounts over a number of years as it overvalues a balance sheet

Question 9

Patents

Answer 9

Intangible asset in the balance sheet
- a license that the owner takes out so that no other person can copy his/her invention without permission

Question 10

Fixed/ Tangible assets

Answer 10

• permanent assets of a business
• last a long time
• change in value slowly
• some are depreciated over time eg. Motor vehicles, equipment