The Purpose of Accounting

Question 1

Accounting

Answer 1

Involves the recording of financial transactions, planned or actual and the use of these figures to produce financial information

Question 2

Income

Answer 2

The money coming into a business

Question 3

Capital Income

Answer 3

The money invested by the owners or other investors used to set up the business or buy additional equipment e.g loan, mortgage, shares, owner’s capital, debentures (medium to long term sources of capital income)

Question 4

Revenue Income

Answer 4

The money that comes into the business from performing its day-to-day function - selling goods, or providing a service e.g sales (cash or credit), rent received, commission received, interest received, discount received

Question 5

Expenditure

Answer 5

Money spent by a business

Question 6

Capital Expenditure

Answer 6

Used to buy capital items, which are assets that will stay in the business for a long period of time

Question 7

Non-Current Assets

Answer 7

Tangible items that will appear on the statement of financial position and include things like land, premises, equipment and vehicles

Question 7

Intangible Assets

Answer 7

Cannot be touched but add value to the business e.g goodwill, patents, trademarks, brand names

Question 8

Revenue Expenditure

Answer 8

Spending on items on a day-to-day or regular basis. These expenses are shown on the statement of comprehensive income, e.g. inventory, rent, rates, heating and lighting etc