Lecture 1-Intro to financial reporting and statements

Question 1

Accounting equation

Answer 1

Assets=capital liability

Question 2

Capital equation

Answer 2

Assets- Liabilities

Question 3

Name the four different types of financial statements

Answer 3

1- statement of financial position
2- Statement of profit and loss(income statement)
3-Statement of changes in equity
4-statment of cash flows

Question 4

statement of financial position

Answer 4

Shows assets/liabilities and equity

Question 5

statement of changes in equity

Answer 5

Connects the financial positions and profit/loss

Question 6

statments of profit or loss

Answer 6

shows revenues,expenses and net/profit loss

Question 7

Income statement

Answer 7

shows revenues,expenses and net/profit loss

Question 8

what is the purpose of the accounting equation

Answer 8

ensures the balance sheet always balances

Question 9

Non current assets

Answer 9

buildings,machinery,vehicles

Question 10

current assets

Answer 10

cash,inventories,recievables

Question 11

name the types of assets

Answer 11

current and non current

Question 12

name the types of liabilities

Answer 12

capital
long term liabilities-loans payable beyond 12 months

current liabilities- payables, overdrafts due within 12 months

Question 13

Ledger accounts

Answer 13

Ledger accounts are individual records within the accounting system that track financial transactions for specific assets ,liabilities,income and expenses

Question 15

How do ledger account works and explain the different types

Answer 15

If a business makes a transaction it goes into the general ledger then individual ledger accounts

This is like having one large piggy bank as a yute and then having separate smaller piggy banks ,e.g

Sweet shop piggy bank
Saving piggy jar

With business it’s the same thing

You can have :
-assets account - record resources owned by business
-liabilities accounts
-equity account
- revenue accounts
-expenses accounts I

Question 16

Double entry bookkeeping

Answer 16

Every transaction has two accounts- one is debited the other is credited

Question 17

Debits and credits

Answer 17

Debits(dr)- debits increase assets and expenses and decrease liabilities and revenue

Credits(Cr)- Increase liabilities, revenue and equity and decrease assets and expenses

E.G
Buying equipment for cash -£5000

Debit the equipment(Asset) -£5000
Credit the cash ( Asset) £5000

Taking a loan out of £10,000

Debit the cash(£10,000)-Asset
Credit the loan payable(10,000)-liability

Paying rent-£2000

Debit the rent (expense)- £2000
credit the cash- £2000

Question 18

Balancing accounts

Answer 18

1- add up both sides- debit and credit
2- calculate the balance -difference between both sides
3- balance is carried forward to the next period

Question 19

Trial balance

Answer 19

A list of all ledger accounts with their debit or credit balances

used to check if total debits=credits

if not balanced, there is an error in recording

Question 20

DEAD CLIC

Answer 20

DEAD (for Debits increase):

Debit
Expenses
Assets
Drawings
CLIC (for Credits increase):

Credit
Liabilities
Income (Revenue)
Capital
How It Works
Debits (DEAD) increase Expenses, Assets, and Drawings.
Credits (CLIC) increase Liabilities, Income, and Capital.

Question 21

classification of accounts

Answer 21

Personal and impersonal

personal-accounts that deal with people and firms-creditors&debitors

impersonal- divided into real and nominal accounts

Question 22

real accounts and nominal

Answer 22

real accounts are accounts that deal with possessions of the business for example buildings, machinery ,computer equipment etc

Nominal-expenses & income are recorded- sales,purchases,wages and electricity

Question 23

N

Answer 23

O