lecture 1

Question 1

define accounting

Answer 1

collecting , analysing and communicating financial informatino

Question 2

State the two types of accoutning

Answer 2

Financial
Managment

Question 3

what is financial accounting to do with

Answer 3

collecting , reporting and conveying information to external stkh of a company

Question 4

Financial accounting gives a business the tool to

Answer 4

communicate with external stakeholders

Question 5

whats a stkh

Answer 5

anyone with an interest in the business

Question 6

example of external stkh

Answer 6

suppliers , gov , community

Question 7

what is managment accounting to do with

Answer 7

collecting , analysing and reporting information to internal stkh ( within an org)

Question 8

give examples of internal stkh within managment accounting

Answer 8

e.g - sale and production dpt , cost dpt bring numbers together and give it to sales dpt so they can set a price for the product

Question 9

How many main financial statements are there

Answer 9

3

Question 10

What are the 3 main financial statements

Answer 10

Income Statement / profit and loss account
Balance Sheet / Statement of financial position
Cash flow statement (we don’t learn about this )

Question 11

what does the income statement show

Answer 11

how much of a profit/loss business has made in a particular period

Question 12

in terms of periods when talking about (income) statements what are the 2 types of periods

Answer 12

annual statement/account (12 months)
interim account ( 6 months )

Question 13

due to the accounting standard what must a limited company do in relatino to income statements

Answer 13

got to produce and publish annual statements to everyone (so we are able to see)

Question 14

What does a balance sheet show

Answer 14

shows financial position of a company

Question 15

why is the financial position of a business important

Answer 15

a company can make profit but still go bankrupt - so profit is not all we need to know about - we also need to consider the assets and liablities they’ve got and if they’re able to pay this off

Question 16

what does a cash flow statement show

Answer 16

shows cash flowing in and out of the business

Question 17

INCOME STATEMENT SLIDES

Question 18

state the 4 components of an income statement

Answer 18

income
expenses
profit
loss

Question 19

define income

Answer 19

any increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decrease of liabilities

Question 20

simple version of income

Answer 20

how much firm earns during that period

Question 21

what is revenu

Answer 21

income earned in a period from normal/main trading activities

Question 22

if a company sells ice cream what would the revenue be

Answer 22

income from selling ice cream

Question 23

if a company has lots of cash and you put this in a bank account and earn interest at the end of the year and the earn interest on this - is it revenue and provide reasoning

Answer 23

its not revenue it is income

because it is not part of the main trading activities

Question 24

what is the first line in the income statement and what is it called

Answer 24

revenue

it is called sales

Question 25

there is a company renting out , individual has ot pay a deposit - should the company record this as revenue and reason

Answer 25

no

because a deposit isn’t part of their main trading activities

Question 26

give me an example of a source of a revenue from a company renting out housing

Answer 26

rent from tenants

Question 27

what are expenses

Answer 27

day to day running costs the business has to pay

Question 28

not all spending count as …..

Answer 28

expenses

Question 29

expenses aka

Answer 29

revenue expenditure

Question 30

expenses must be listed in the

Answer 30

income statement

Question 31

examples of expenses

Answer 31

rent
wages
salaries
cleaning

Question 32

why do business owners want to minimise profit

Answer 32

so they can pay less tax

Question 33

What is the only type of spending that can be put in the income statemtn

Answer 33

spending that classifies as an expense

Question 34

businesses can’t avoid tax because

Answer 34

they must go with the accounting standard

Question 35

if a house renting company bought furniture to fully furnish house does this count as an expense - provide reasoning

Answer 35

no

because
-this counts as an asset
-it’s not a part of daily operations of the business ~ daily operations more so to do with calling , clients , doing inspections

Question 36

why would £800 each month for mortgage interest count as an expense for a renting company as got to pay it every year and is involved with being able to run your bs day to day

Answer 36

got to pay it every year
it’s involved with being able to run your bs day to day

Question 37

why is paying council tax in this renting company considered an expense

Answer 37

got to keep paying if you want the house to continue operating

Question 38

why is tax an expense

Answer 38

there is a tax line in profit and loss accounting so it is an expense

Question 39

any item in the income account is either

Answer 39

income or expense

Question 40

a company buying furniture and paying money to install it is - why is it called expenditure and what type of expenditure is it

Answer 40

called expenditure becasue we’re spending money to pay for something

capitla expenditture as expenditure on capital goods

Question 41

only revenue expenditure can be classified as

Answer 41

expenses