SET 2 POA

Question 1

LIMITATION OF TRIAL BALALNCE

Answer 1

it is not an absolute proof of accuracy. there may be errors not revealed in an balanced trial balance

Question 2

accounting entity theory

Answer 2

the activiites of a business are seperate from actions of the owner. all transactions are recorded from biz pov

Question 3

going concern theory

Answer 3

a biz is assumed to have indefinite econonmic life unledd theres evidence that it may close down.

Question 4

monetary theory

Answer 4

only transactions that can be measured in monetary terms are recorded.

Question 5

accounting period

Answer 5

the indefinite life of a biz is divided inot regular time intervals

Question 6

historical cost theory

Answer 6

transactions should be recorded at their original cost

Question 7

revunue recognition theory

Answer 7

revenue is earned when goods have been sold or services have been provided

Question 8

prudence theory

Answer 8

the business shld not overstate profits and assets and should not understate liabilities and losses

Question 9

matching theory

Answer 9

expenses incurred must be matched against income earned in the smae period to determine the profit of that period

Question 10

accural basis of accounting

Answer 10

revenue and expenses should eb recorded in the year that it is earned and incurred regardless of whther cash has been received or paid.

Question 11

objectivity theory

Answer 11

accounting information must be supported by reliable and verifiable evidence so that financial reports will be free of bias and opinions

Question 12

invoice

Answer 12

informs credit customer of the amt owed after goods have been sold or services have been provided on credit

Question 13

credit note

Answer 13

reduced the amt owed by credit customer for eralier inoice that overcharged or after goods have been returned by credit customer

Question 14

debit note

Answer 14

increases the amt owed by credit customer for earlier invoice that undercharged

Question 15

payment voucher

Answer 15

processes paymetn to credit supplier where payment must be approved by authorised personnnel and supported by suppliers invoice

Question 16

difference of CA nad NCA

Answer 16

NCA are resources that the biz owns to generate income for more than one financial year. CA are resources that the biz owns which can be converted into cash easily and benfits the biz within one financial year.

Question 17

diff btw CL and NCL

Answer 17

NCL arer obligations the biz owes which has a repayemnt of more than one financial year. CL are obligations tha the biz owes which has a repayment of one financial year.

Question 18

equity

Answer 18

claim by owners on the net assets of the biz

Question 19

accounting equation

Answer 19

total assets = total l + e

Question 20

expanded acc eqn

Answer 20

total assets = total liabilities + capital - drawings + income - expenses

Question 21

capital

Answer 21

owners contribution of personal resources into the biz

Question 22

drawings

Answer 22

owner withdraws biz resources for personal use

Question 23

share capital

Answer 23

cash raised by issuing shares to shareholder

Question 24

retained earnings

Answer 24

accumalated profits and losses that has not distrinuted to shareholders since operation

Question 25

dividends

Answer 25

portion of retained earnings that was distributed to shareholders

Question 26

what changes shareholders equity

Answer 26

increase in share capital
profit or loss made by niz
dividends declared

Question 27

diff btw cash and credit transac

Answer 27

cash tran is animmeditae payment for cash sales or cash purchases
credit transac is postponed payment for credit sales or credit purchease

Question 28

trial balance

Answer 28

a list of ending balances of all accounts extracted from ledgers at a given date

Question 29

purpose of trial balace

Answer 29

check for arithmetic accuracy in recording
facilitate prep of FS

Question 30

ACCOUNTING

Answer 30

is an AIS that rpovided acc infor for stakeholders to make informed decision regarding the maangaement o the bis

Question 31

role of acc

Answer 31

they are dtewards of the biz of benhalf of owners and set up AIS to cllate and report AI for stakeho;ders to make informed decisions.

Question 32

why is objectivity and integrity impt

Answer 32

stakeholders place trust int eh acc info provided by acc to help them make informed biz decisons. Acc must be straightforward and honest inall their professional relationships and ensure no bias or conflict of interest overide their professional judgemet

Question 33

integrity

Answer 33

being straightfowrward and honest ina all professinal relationhips

Question 34

objectivity

Answer 34

is not letting bias, conflict of interest or undue influence of others to override their proffessional judgement

Question 35

non acc info eg

Answer 35

industry and economic outlook

Question 36

acc info eg

Answer 36

FS including gross profit and profit of the year
CAB bal

Question 37

why are owners and managers of ab iz interested in Non acc info

Answer 37

to make well informed decisons abt the biz to improve performance and profitabilty of biz

Question 38

diff btween trading and service biz

Answer 38

trading biz buys and sell goods to customer for profit
service biz provides services to cusomers for profit

Question 39

SP FEATURES

Answer 39

1. owner has full control of the biz
2. minimal administrativeve duties requ to set up SP
3. but its more difficult to borrow money from bank as SP has limited perosnal assets to serve as collateral
4. and owner is obliged topay all debts and losses incurred by biz using personal assets

Question 40

LLP

Answer 40

1. easier to borrow money from bank as there are more sources of perosnal asstes from partners and business assets to serces as collateral
2. partners are not liable for debts and losses incurred by LLP. ONLY PARTNER WHO COMMITTED WRONGFUL ACTIONS CAUSING LLP losses are liable for them
3. all partners need to agree to any additon or withdrawal of partners

Question 41

PLC

Answer 41

1. easier to borrwo money from bank as there are more busniess assets to serve as collatorel and the biz is also able to issue shares to shareholders to raise funds.
2. sharholdersa are not liable for debts and losses incurred by PLC AND HAVE no risk of losing personal assets. at most, they only forfeit their investments and dont receive dividends
3. PLC needs to comply to stricter statutory req and file annual F reports