Lesson 1 - What is Accounting? Flashcards
What is Accounting?
Accounting is a management information system that involves the collecting, sorting, classifying and recording of financial data to produce and report financial information to assist business owners in decision making.
What are the four stages of the accounting process?
- Source documents
- Records
- Reports
- Advice
A source document is…
A document that provides both the evidence that a transaction has occurred and the details of the transaction itself.
Recording is…
The process of sorting, classifying and summarising the data contained in the source documents so that it is more useable.
Reporting is…
The preparation of financial statements that communicate financial information to the owner.
Advice is…
The provision to the owners of a range of options available to their aims/objectives, together with recommendations as to the suitability of those aims / objectives
The accounting process is used to…
…take financial data and convert it into financial information in order to be able to make decisions about the business.
T/f - “Tax invoice” means the source document is an invoice.
False - this is on all source documents which involve GST and is a requirement set by the Australian Tax Office.
The two types of transactions are…
Cash and credit.
The point of difference between cash and credit transactions is…
The immediacy of the payment.
Cash = Customer pays immediately.
Credit = Customer pays at a later date.
Give me two pieces of info that would indicate that a source document was an invoice.
- Payment terms
- Invoice number
- The words “Due by”
T/f - The business at the top of the invoice has issued the source document.
True - the header can always be used to identify who issued the invoice.
This source document is a…
Cheque butt.
This source document is a…
Invoice.
T/f - This document is a source document.
False - This is a cheque. It cannot be used as a source document as it is not retained by either party in a transaction. It must be paid into the bank for processing.
This source document is a…
Memo.
T/f - This document is a source document.
False - a Bank Statement is not strictly a source document, though it can be used to verify a transaction in the absence of the original source document (e.g. if it got lost)
This source document is a…
Invoice.
This source document is a…
Cheque butt.
This source document is a…
Receipt.
This document is a…
Bank Statement
