Term 1 - Accounting Flashcards
What is the purpose of accounting?
The purpose of accounting is to identify, measure and communicate financial information about a particular entity to assist any interested parties in their decision making.
What is the accounting equation?
The accounting equation is the relationship between assets, liabilities and equity (A = L + OE).
What is an account?
An account refers to a place to record transactions that occur within the business.
What is accounts payable?
Money owed by a business to its creditors.
What is accounts receivable?
A person/business that owes another person/business money.
What is an asset?
Items of value owned by the business (Furniture, bank account, stock, vehicles, building, accounts receivable).
What is an assumption in accounting?
The rules a business uses to dictate operating procedures and remain in compliance with all relevant requirements and regulations.
What is the purpose of a balance sheet?
The purpose of the Balance Sheet (Statement of Financial Position) is to measure an entity’s assets, liabilities and equity at a certain point in time.
What is capital in accounting?
Owner’s contributions to the business (Cash, Assets).
What is the purpose of a cash budget?
The purpose of the Cash Budget is to predict expected cash receipts and payments for a set period of time and the expected closing bank balance.
Who is a consumer?
A person who consumes a product or service.
What is credit?
The ability to borrow money under the agreement that you’ll repay the debt later.
What is a debit?
Increases an asset or expense account, or decreases equity, liability or revenue accounts.
What is debt?
Debt is money or valuable items that you owe a person or business, it is considered a liability.
What are drawings?
Owner takes cash out of the business.
What are expenses?
Outflows of cash in the normal operations of a business (electricity, wages, supplies used, rent, interest).
What is financial information?
Anything related to the financial activities and performance of a business.
What are financial statements?
The purpose of financial statements is to report financial information to interested parties to enable them to make informed decisions regarding the business.
What does GST stand for?
GST stands for Goods and Services Tax.
What is GST?
A broad-based tax of 10% on most goods and services.
What is GST inclusive?
Already added to the amount you see.
What is GST exclusive?
Left out and you need to add it to an item.
What is income?
Income refers to the total amount of money a person or business earns in a specific period.
What is the purpose of an income statement?
The purpose of Income Statement is to measure revenues and expenses incurred during the period and calculate whether a profit or loss has been made.
