POA CHAPTER1

Question 1

what does a trading business do?

Answer 1

buys from supplier, sell goods to others

Question 2

examples of trading business

Answer 2

bookshop, supermarket

Question 3

what does a service business do

Answer 3

provides service to customers

Question 4

examples of service business

Answer 4

gym, cinema, dental, message parlour, clinic, tuition centre

Question 5

what are the different forms business ownership

Answer 5

sole proprietorship, limited liability partnership, private limited company

Question 6

cons of sole proprietorship

Answer 6

harder to get a bank loan, personally responsible for any losses or debts, funding mainly comes from owner

Question 7

pros of sole proprietorship

Answer 7

easy to set up, minimal administrative duties, full control of business

Question 8

pros of limited liability partnership

Answer 8

easy to get a bank loan, larger access to funds, partners are not personally responsible for debts or losses

Question 9

cons of limited liability partnership

Answer 9

more procedures and formalities to follow, control is shared among partners

Question 10

who are stakeholders

Answer 10

people interested in the business, make use of info to make informed decisions

Question 11

who devises strategic plans to run the business

Answer 11

manager

Question 12

who sell similar goods and provide similar services, need to know whether i am comparable to the biz and how to improve on performace

Answer 12

competitors

Question 13

who contribute capital to the biz. need to decide whether to invest or sell the biz.

Answer 13

owner

Question 14

who enforce tax regulations and decide amount of tax to collect from biz

Answer 14

government

Question 15

who buys goods and services from the biz and decides whether to continue buying from biz.

Answer 15

customer

Question 16

who work for biz, decide whether to continue working at the biz

Answer 16

employees

Question 17

Who lends money to the biz, expecting interest in return. I need to know whether to grant loans to the biz.

Answer 17

lender

Question 18

Who supplies goods/services to the biz. I need to decide whether to sell to the biz on credit

Answer 18

supplier

Question 19

what is the role of the accountant

Answer 19

provides accounting and non accounting information for stakeholders to make informed decisions on the management of resources and the performance of biz

Question 20

what are the roles of an accountant

Answer 20

• set up the accounting information system to provide accounting information for decision making
• act as stewards of the biz, by managing resources of the biz on behalf of the owner

Question 21

what are the professional ethics of accountants

Answer 21

having integrity and being objective

Question 22

how does an accountant have integrity

Answer 22

an accountant with integrity is being straightforward and honest in all professional relationships

Question 23

how does an accountant be objective

Answer 23

• will not let bias, conflict of interest or the undue influence of others override his/her professional judgement

Question 24

what are the accounting theories

Answer 24

• accounting entity
• going concern
• accounting period
• monetary
• objectivity
• historical cost

Question 25

what is accounting entity

Answer 25

accounting entity states that the activities of the biz is seperate from the actions of the owner.

Question 26

what is going concern

Answer 26

going concern states the biz is assumed to have indefinite economic life unless there is credible evidence that it may close down

Question 27

what is accounting period

Answer 27

states that the life of the business is divided into regular time intervals

Question 28

what is monetary

Answer 28

only business transactions can be measured in monetary terms like dollars and cents

Question 29

what is objectivity

Answer 29

accounting information must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases

Question 30

what is historical cost

Answer 30

transactions should be recorded at their original cost

Question 31

define assets

Answer 31

assets are resources a business owns & contracts that are expected to provide future benefits

Question 32

define liability

Answer 32

obligations owed by a business to others that are expected to be settled in the future

Question 33

define equity

Answer 33

claim by the owner on the net assets of a business

Question 34

all examples of assets

Answer 34

cash in hand, cash at bank, property, inventory, motor vehicles, fixtures and fittings, office equipment, trade receivables

Question 35

all examples of liability

Answer 35

bank loan, bank overdraft, mortgage loan, loan from (lender) , trade payables

Question 36

all examples of equity

Answer 36

capital, profit and equity

Question 37

whats the basic accounting equation

Answer 37

A = L + Eq

Question 38

whats the expanded accounting equation

Answer 38

A = L + Capital + (income - expense ) - drawings

Question 39

define profit

Answer 39

when a business starts operations, it will generate income and incur expenses, resulting in either a profit or loss

Question 40

define income

Answer 40

income refers to amounts earned through the activities of a business

Question 41

examples of income

Answer 41

sales revenue, service fee revenue, rental income, commission income, interest income, discount received

Question 42

define expense

Answer 42

expenses refers to the cost incurred to earn income in the same accounting period

Question 43

examples of expense

Answer 43

cost of sales, interest on loan, rent expense, wages/salaries, insurance expense, advertising expense, utilities expense, maintenance/repairs, stationery expense, discount allowed

Question 44

Assets, drawings, expense