Lesson 2- Introduction To Accounting

Question 1

Explain the meaning of transfactions

Answer 1

The actions and reactions having monetary implications of one person or firm. It involves the transfer of money or moneys worth from one person to another

Question 2

Explain the meaning of an event

Answer 2

Is used to mean a happening, as a consequence of transactions result

Question 3

Describe the main definition of accounting

Answer 3

Is the process of identifying, measuring, recording and presenting financial data/ financial information to the users for decision marking

Question 4

What is the difference between bookkeeping and accounting?

Answer 4

Bookkeeping only involves the identification and recording of financial information bookkeeping is a sub part of accounting

Question 5

What is the function of accounting?

Answer 5

1) capture information about a business and its financial activities
2) for recording of financial information, analyzing and presenting it to users for decision making
3) for helping in coming up with informed financial decisions
4) for helping in managing finances

Question 6

Who’s are the users of financial information

Answer 6

All stakeholders that are directly or indirectly affected or have somehow invested in the operation of the business
Owners/stakeholders, employees, customers, external investors, suppliers, receiver of revenue and creditors

Question 7

Name the 5 qualitative characteristics of financial statements

Answer 7

1. Relevance
2. Comparability
   3) reliability
   4) timeliness
   5) understandability

Question 8

What are the 4 main characteristics of useful financial information

Answer 8

1. Relevance
2. Comparability
   3) reliability
   4) understandability

Question 9

What are the five elements of financial statements

Answer 9

1) assets
2. Equity
3. Liability
4. Income
5. Expense

Question 10

When is an element recognized in the the financial statement

Answer 10

1. It is probable that any future benefit associated to the item will flow to or from the entity
2. The item has a cost value that can be measured reliably

Question 11

Define asset

Answer 11

A resource controlled by an entity as a result of pas5 events, and from which economic benefits are expected to flow to the entity

Question 12

Define liability

Answer 12

The present obligation of an entity arising from past events, in which the settlement is expected to result in the outflow of resources form the entity

Question 13

Define equity

Answer 13

Is the residual of assets minus liability

Question 14

Define income

Answer 14

An increase in economic benefits during an accounting period
In the form of inflows or enhancement of assets
Or decrease in liabilities
Other than those relating to distribution from equity participants

Question 15

Define expense

Answer 15

An decrease in economic benefits during an accounting period
In the form of outflows or decrease of assets
Or increase in liabilities
Other than those relating to distribution from equity participants