L01 - Introduction

Question 1

What is accounting?

• Process (3)
• Goal (3)
• Stakeholders (3)

Answer 1

Process of ..

1. Recording,
2. Summarizing (classifying),
3. Analyzing, financial transactions

Goal

1. Provide information about a business’s position and performance.
2. Produce accurate statements that stakeholders can use for decision-making
3. Support economic decisions

Stakeholders

1. Managers,
2. Investors,
3. Creditors, etc.

Question 2

Why do we need to learn accounting? (3)

Answer 2

• make investment decisions
• monitor management performance
• good performers get more capital investment (companies, projects, managers, etc.)

Question 3

Financial vs Managerial Accounting

• Who are the Decision Makers? (2)
• What Decisions are Made? (2)
• What Information is Needed? (2)

Answer 3

Question 4

Types of Financial Statements (4)
Key Focus / Formular

Answer 4

• Balance Sheet (Statement of Financial Position)
  Assets = Liabilities + Equity
• Income Statement (Profit and Loss Statement)
  Net Income = Revenues - Expenses
• Statement of Stockholders’ Equity
  Tracks how equity is affected by company activities like profits, dividends, and changes in ownership.
• Statement of Cash Flows
  Provides insights into the company’s liquidity and cash management.

Question 5

Financial accounting is a system that reports Financial Position / Performance, where? (4)

Answer 5

Position (at a Point in time)

• Balance Sheet

Performance (over a Period of time)

• Statement of Equity
• Statement of Cashflow
• Income Statment

Question 6

What is the Accounting Cycle?

• Continuously (2)
• End of Accounting Period (3)

Answer 6

CONTINOUSLY

1. ANALYSE - Determine the financial impact of business activities.
2. RECORD
   (a) JOURNALIZE
   Record transactions in chronological order in the journal. (debit-credit at least two accounts)
   (b) POST TO LEDGER
   Transfer journal entries to the general ledger accounts. (summarise)

END OF ACCOUNTING PERIOD

3. ADJUST
   (Accrual, Defferal, Depriciation via Contra-X Acc.)
   (a) Prepare an unadjusted trial balance
   (b) Prepare an adjusted trial balance
4. REPORT - Prepare Financial Statements.
   Compile adjusted balances into financial reports.
5. CLOSE - Close Performance Accounts
   Reset temporary accounts for the next period. (Balance Sheet)

Question 7

What is an Account in Accounting?

• What is a journal entry in accounting? (3)
• Various types of accounts! Activ / Passiv (5)

Answer 7

Transactions are recorded in chronological order in debits and credits in at least two accounts (Double-entry system).

Aktiv (Balance Sheet Accounts)

• Asset (A): Vermögenswert
• Liability (L): Verbindlichkeit
• Equity (SE): Eigenkapital

Passiv (Income Statement Accounts)

• Revenue (R): Einnahmen/Erträge
• Expense (E): Ausgaben/Kosten

Question 8

What are two common accounting documents? (2)

• How are they used in the accounting process?

Answer 8

General Journal
Tabular, chronological record where business activities are captured in debits and credits in at least two accounts.

General Ledger (T-Account Structure)
Listing of all accounts and their balances, Accounts are grouped in five elements. (Assets, Liabilities, Equity, Revenues, Expenses)

Question 9

⭐ How is the General Ledger structured and organized in accounting? (4)

Answer 9

Assets (A)

• Current asset’s
• Fixed assets

Liabilities (L)

• Short term liabilities
• Long term liabilities

Equity (SE)
Income Statement Acc. (R/E)

Question 10

Accounting Equation (3)

Answer 10

The accounting equation is represented on the balance sheet:
Equity = Assets - Liabilities

• Balance sheet accounts:
  Assets, Liabilities and Equity
• Income statement accounts:
  Revenues and Expenses
  (net income / loss gets added or subtracted to retained earnings at the end of the end of the accounting period)