POA SUMMARY Flashcards
- Name the features of sole proprietorship
- the sole proprietor is the only owner of the business.
- the sole proprietor has full control over the management of the business.
- What is the role of accounting?
accounting is an information system that provides accounting information for stakeholders to make informed decisions regarding the management of resources and performance of the business.
- Name the stakeholders and their features
- employee: whether to continue working at the business or not.
- managers: whether to consider ways on how to improve the business.
- customers: whether to continue buying from the business depending on the businesses ability to provide them with the goods and services that they need.
- What are the role of accountants?
- accountants set up an accounting information system.
- become stewards of business.
- What professional ethics do accountants need?
integrity and objectivity
- State the features of the professional ethics
- integrity: is straightforward and honest in all professional relationships.
- objectivity: is objective and will not let bias, conflict of interests, or the undue influence of others override his or her professional judgement.
- What are the two types of business?
trading and service business
- What is the definition of a trading business?
a trading business buys goods from the supplier and then sells the goods to the customers.
- What are some examples of a trading business?
- bookshop.
- supermarket.
- ice cream shop.
- What are some examples of a service business?
- cleaning services.
- medical services.
- banking services.
- What is the definition of a service business?
a service business provides services to its customers.
- What are the types of source documents?
- receipt.
- invoice.
- credit note.
- debit note.
- payment voucher/ remittance advice.
- bank statement.
- What is the definition of a cash transaction?
payment is made at the same time or immediately during a cash sale or purchase.
- What is the definition of a credit transaction?
payment is delayed or postponed during a credit sale or purchase.
- What are the two types of business transactions?
cash and credit transaction
- What is the purpose of a receipt?
sale/ purchase of goods/services on cash basis.
- What is the purpose of an invoice?
sale/ purchase of goods/services on credit basis.
- What is the purpose of a bank statement?
bank charges/ direct credit transfer/ direct deposit
- What is the purpose of a debit note
undercharge of goods/services
- What is the purpose of a credit note?
return of goods or overcharge of goods/services
- What are the accounting theories used for chapter 2?
monetary theory, objectivity theory, historical cost theory
- What is the purpose of a payment voucher/ remittance advice?
payment of goods/services to suppliers
- State the source documents cycle
Source Documents -> Journal -> Ledger -> Trial Balance -> Financial Statements
- State the accounting information system
Identify & Record -> Adjust -> Report -> Close
- State the objectivity theory
According to the objectivity theory, accounting information recorded must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases.
- State the monetary theory
According to the monetary theory, only business transactions that can be measured in monetary terms are recorded.
- State the historical cost theory
According to the historical cost theory, transactions should be recorded at their original cost.
