Poa Flashcards
What is a trading business
Buys goods from suppliers and sells to customers
What is a service business
Provides services to its customers
What is a stakeholder
A group of people who use information of business to make decisions
Give me two stakeholders
Customers: Buys goods or services from the business
Suppliers: Supplies goods and/or services to the business
What is the role of accounting
Provides information for decision making by stakeholders and business owners to make informed decisions regarding the management of resources and performance of business
What is the role of an accountant
Act as a steward of the business to preparing and providing accounting information for stakeholder decision making
Two professional ethics
Integrity: Being straight forward and honest in all professional and business relationships
Objectivity: Not letting bias, conflict of interest and undue influence of others override professional judgement
What theory is applied for business transactions
Monetary Theory
What is Monetary Theory
Monetary theory states that only business transactions that can be expressed in monetary terms are recorded in the books
What is a cash transactions
When payment is made at the point of sale or purchase
What is credit transaction
When payment is delayed or postponed at a later date from the point of sale or purchase
What is the accounting cycle
Identify and record
Adjust
Report
Close
What is source documents
Provide proof that transaction has occured
What 2 theory are applied for source documents
Objectivity theory
Historical cost
What is objectivity theory
Provides evidence to capture occurrence of transaction
What is historical cost theory
Transaction is recorded at the original cost that is occured
What is the accounting information cycle
Source Documents
Journal
Ledger
Trial balance
Financial statements
What is receipt
Acknowledge payment received from customer
What is invoice
Informs credit customers of amount owed after the sale of goods or provision of service on credit
What is credit note
Reduces the amount owed by credit customers due to overcharges or return of goods
What is debit note
Increase the amount owed by credit customer due to undercharges
Payment voucher
Process payment by credit suppliers
Bank statement
Check and tallies business cash at bank account
What are assets
Resources owned or controlled by the business to carry out its business activities
What are liabilities
Amount the business owes to other business or other people
What is equity
Amount contributed by owners and profit generated by the business
What is income
Amount earned through the main activities of the business
What is sales revenue
Amount earned from a trading business selling goods
What is service fee revenue
Amount earned from a service business from providing services
What is other income
Income not earned from the main activities of the business
What is the theory applied for accounting equation
Accounting entity theory
Basic accounting equation
Assets = Liabilities + Equity
Expanded accounting equation
Asset = Liability + Capital + Income - Expense - Drawings
What is accounting entity theory
Activities of the business are separate from the actions of the owner
What is ALICE
Assets
Liabilities
Income
Capital
Expense
What is ledger account
Consolidation of all transactions affecting to a specific asset, liability income equity and expense
What is trade discount
Reduces list price amount
To encourage customers to buy in bulk, to buy more regularly to instil customer loyalty
What is cash discount
Reduces invoice amount
To encourage credit customers to pay early within a certain time
What is discount allowed
It is an expense and will decrease profit
Recorded with trade receivable
What is discount received
It is an income and will increase profit
Recorded with trade payable
What is the purpose of trial balance
Check for arithmetic errors
To prepare financial statements