Introduction to Business, Bookkeeping and Accounting

Question 1

What is the primary objective of entrepreneurs?

Answer 1

To make a profit.

Question 2

To when can the origin of accounting be traced?

Answer 2

Early civilisation, over 5000 years ago.

Question 3

Why did accounting develop?

Answer 3

To track one’s assets and prove ownership.

Question 4

What was the forst form of primitive written language?

Answer 4

Accounting.

Question 5

How long did primitive accounting last?

Answer 5

Until the 12th century BC.

Question 6

How did the Romans initially record assets?

Answer 6

Using Roman numerals.

Question 7

Why did the Romans start using Arabic numerals?

Answer 7

Roman numerals were imprecise for recording financial data.

Question 8

What is known to be the first modern form of accounting?

Answer 8

Double-entry accounting.

Question 9

Who developed double-entry accounting?

Answer 9

Luca Pacioli, a Franciscan friar.

Question 10

When was Fra Luca Pacioli born?

Answer 10

In the year 1445 AD.

Question 11

Where was Luca Pacioli born?

Answer 11

In Sansepolcro, Tuscany.

Question 12

Who was Fra Luca Pacioli friends with?

Answer 12

Leonardo Da Vinci.

Question 13

When did Pacioli publish Summa de Arithmetica, Geometria, Proportioni et Proportionalita?

Answer 13

In the year 1494.

Question 14

What is Luca Pacioli known as?

Answer 14

The Father of Accounting.

Question 15

What are nominal accounts?

Answer 15

Accounts related to income and expenses.

Question 16

Who are the primary users of financial information?

Answer 16

Investors
Employees and labour unions
Lenders
Suppliers
Customers
Governments
General public
Management

Question 17

What is GAAP?

Answer 17

Generally Accepted Accounting Practices

Question 18

What is the IFRS?

Answer 18

The International Financial Reporting Standards.

Question 19

What is the IASB?

Answer 19

The International Accounting Standards Board.

Question 20

When did the IASB replace the IASC?

Answer 20

2001

Question 21

Who develops IFRS?

Answer 21

The IASB.

Question 22

What are the fundamental qualitative characteristics of IFRS?

Answer 22

Relevance
Faithful representation

Question 23

What are the enhancing qualitative characteristics of IFRS?

Answer 23

Comparability
Understandability
Timeliness
Verifiability

Question 24

What is a sole trader?

Answer 24

A business that is owned by one person and does not have a separate legal personality.

Question 25

What is a partnership?

Answer 25

An agreement between two or more people that contribute to a business to obtain mutual benefit. A partnership does not exist independently of the partners and so does not have a separate legal personality.

Question 26

What forms can a company or close corporation take?

Answer 26

Profit company that is incorporated for its shareholders’ financial gains.

Non-profit company that is incorporated for public benefit and is not distributable to its incorporators.

Question 27

What is an external company?

Answer 27

A foreign company that is carrying out business within the Republic.

Question 28

What are the steps in bookkeeping and accounting cycles?

Answer 28

Monthly bookkeeping cycle:

1. Transactions take place
2. Source documents summarise transactions
3. Journals summarise the source documents
4. General ledger summarises journals
5. Trial balance summarises general ledger

Yearly accounting cycle:

1. Bookkeeping cycle
2. Statement of profit or loss and other comprehensive income summarises financial performance
3. Statement of financial position summarises financial position.