Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ACC1100 > Midsemester Test 1 > Flashcards

Midsemester Test 1 Flashcards

1
Q

What is accounting?

A

A process where we identify economic events, record them and communicate the information to someone who needs it.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Why is accounting important?

A

Accounting allows us to make informed decisions about the allocation of scarce resources.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Who are internal users and what is an example of one?

A

Internal users are those who plan, organise and run a business. Examples include managers and CFOs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Who are external users and what is an example of one?

A

External users are those outside the business who are interested who are interested in knowing about the activities of an entity. Examples include investors, creditors, and regulatory bodies such as the ATO.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Distinguish between sole proprietorship (1), partnership (2) and company (3).

A
  1. Owned by one person
  2. Owned by more than one person
  3. Organised as a separate legal entity and owned by shareholders, have limited liability as you only pay as much as your shares are worth.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the rules of accounting called and what are they based on?

A

“Accounting standards” and are based on the underlying “conceptual framework”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the conceptual framework?

A

It can be considered the general principles of financial reporting and is used as the basis for developing accounting rules and regulations. Has two parts, SAC1 and the AASB Framework. It answers the who, what, where, why questions of accounting.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is SAC1 and what does it define?

A

Statement of Accounting Concept 1 defines a reporting entity, answers the “who” part.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is a reporting entity?

A

Any entity in which it is reasonable to expect users who depend on financial statements for information to make economic decisions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a dependent user?

A

Any user who needs information but does not have to power to get it.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the AASB Framework?

A

The second part of the conceptual framework. It provides the objective of reporting (why) and the qualitative characteristics of information including assumptions and definitions and recognition criteria of the 5 elements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the objective of financial reports?

A

To provide useful information for decision making and to show the accountability of management.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are the assumptions underlying financial reports?

A

Accrual basis - record transactions when they occur

Going concern - entity assumed to continue indefinitely

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the qualitative characteristics that make financial statements useful to others?

A

Understandable by users with reasonable business knowledge
Relevant if it influences economic decisions or has predictive value
Reliable if it is free from material error or bias
Comparable if we can compare against other entities or over time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Distinguish between recognised and disclosed

A

Recognised if it meets definition and recognition criteria, disclosed in the notes if it meets definition but doesn’t meet the definition criteria

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the recognition criteria for the elements?

A

Probable occurrence and reliable measurement - slightly different wording for each element e.g. probable occurrence of future benefits for asset

17
Q

What are the essential characteristics for an asset?

A

Has to yield future economic benefits
Has to be under control of the entity
Result of a past event

18
Q

What are the essential characteristics for a liability?

A

Future outflow
Present obligation
Result of a past event

19
Q

What is owner’s equity

A

It can be thought of as the wealth of the business

20
Q

What distinguishes income and expenses from assets and liabilities?

A

Income and expenses are actions, assets and liabilities are not

21
Q

What are the essential characteristics for income?

A

An inflow of economic benefits
Resultant increase in equity
Excludes owner’s contributions of equity

22
Q

What are the essential characteristics for an expense?

A

An outflow of economic benefits
Resultant decrease in equity
Excludes distributions to owners

23
Q

Distinguish between current and non-current assets and liabilities.

A
  • Current - items that will give us benefits within a year (items converted to cash within one year or consumed within one year) e.g. inventory, office stationery, creditors
  • Non-current - Items intended to be held for longer than one year e.g. equipment, land, motor vehicles, mortgage, 5-year loan
24
Q

What changes are present in a Statement of Changes in Owner’s Equity?

A

Capital, profit and drawings/dividends

25
Q

What are the steps of the accounting cycle?

A

Identifying transaction, measuring/recording it and communicating it

26
Q

What is a source document and what is an example of one?

A

Evidence that a transaction has occurred, examples include invoices and receipts.

27
Q

What is the accounting equation?

A 
Assets = Liabilities + Owner’s Equity + Income - Expenses + Additional Capital - Drawings
A = L + OE + I - E + K - D
28
Q

What is the difference between a T-Ledger and a 3-column ledger?

A

3-column format has a running balance. DO NOT FORGET CR OR DR.

29
Q

What do the numbers in the Chart of Accounts correspond to?

A
  • 1 = Assets (100-149=Current, 150-199=Non-current)
  • 2 = Liabilities (200-249=Current, 250-299=Non-current)
  • 3 = Owner’s Equity
  • 4 = Income
  • 5 = Expenses
30
Q

How do we balance a T-Account?

A

We calculate which side is larger, balance it with a closing balance on the opposite side that becomes the opening balance for the previous month on the larger side?

31
Q

How do we attain gross profit?

A

Net sales - cost of sales

32
Q

Distinguish between service and retail firms.

A

A service firm is a firm that provides a service to attain revenue.
A retail firm is a firm that sells a product to earn revenue.
There are mixtures of both.

33
Q

Why do we do a stock take at the end of the period using the perpetual method?

A

To see if there is a stock gain or stock loss, this can only be determined by physical count. The stock gain or loss is added AFTER GROSS PROFIT IN THE INCOME STATEMENT.

34
Q

How do we calculate COGS/COS using the periodic method?

A

Beginning inventory + purchases - purchase returns and allowances + freight - ending inventory

puchases - purchase returns = net purchases

Beginning inventory + purchases - purchase returns and allowances + freight = cost of goods available for sale

35
Q

How do we calculate GST?

A
  • If a transaction amount does not have GST already included and specifically states so (not including GST, excluding GST), add 10% to the total.
    • e.g., Sales $2000 + 10% = $2,200
  • If an amount is GST inclusive, divide the total by 11 to find the GST amount.
    • e.g., Sales $2,200 / 11 = $200 tax

ACC1100 (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions