Term 1 Flashcards
Accounting
Accounting is the process of identifying, measuring, interpreting and communicating financial and other information to interested parties
Accounting Entity Assumption
Presumes that a business has an existence has an existence separate from the private financial affairs of its owner
Sole Trader
Is a person who is the only owner of a business
Assets
an item of value that is owned by the business
E.g Inventories
Liabilities
the amounts that a business owes
E,g Accounts Payble
Revenue
income earned by a business
E.g Sales
Expense
costs incurred in the running of the business
E.g Supplies Telephone, Stationary
Owners Equity
the value of the owners investment in the business
E.g Capital, Drawning
Capital
assets the owner invests in the business
Drawings
assets the owner withdraws from the business
Accounting Standards
are rules, practices and procedures with which members of accounting bodies must comply
Double Entry Accounting
The Double Entry Process mean that when a transaction is made it effects two accounts where the total debits must equal the total credits
The Accounting Process
Transaction=>Source Document=>Analysis of the transaction=> Journalise the transaction=> Post to General Ledger=>Prepare Trial Balance
“The Accounting Equation is always an equality”. Explain.
The Accounting equation is always an equality, as the source of funds, the liabilities and owners equity, are equal to the uses of the funds, the assets. Assets are of a debit nature and are always equal to the credits, the liabilities are owners’ equity
A = L + OE
The Objective of Accounting
To Provide information for decision making
To Assist in discharging accountability
To Help in evaluating preformance
