U1, AOS 1: KK7 - Accounting Elements Flashcards
What is an asset?
Definition: Assets are economic resources owned or controlled by a business that are expected to provide future benefits.
Examples: Cash, accounts receivable, inventory, property, equipment, and investments.
What are liabilities?
Definition: Liabilities are obligations of a business that arise from past transactions and are expected to result in an outflow of resources.
Examples: Accounts payable, loans, bonds, and accrued expenses.
What is owners equity?
Definition: Equity represents the ownership interest in a business after subtracting its liabilities from its assets.
Examples: Capital, net profit/loss, drawings, capital contribution
What is revenue?
Definition: Revenue is the income earned by a business from its primary operations, such as the sale of goods or services.
Examples: Sales revenue, service revenue, interest revenue, and rental revenue.
What are expenses?
Definition: Expenses are the costs incurred by a business to generate revenue during its normal operations.
Examples: Cost of goods sold, wages, utilities, rent, and interest expenses.
What is the acronym used to help you remember the accounting elements?
DEALER
Dividends (Y12 content)
Expenses
Assets
Liabilities
Equity (owners)
Revenue
Which of the following is considered an asset in accounting?
a) Accounts payable
b) Notes payable
c) Accounts receivable
d) Salaries expense
c) Accounts receivable
What does the equity of a business represent?
a) Total revenue generated
b) Total assets minus total liabilities
c) Total expenses incurred
d) Total liabilities minus total assets
b) Total assets minus total liabilities
Which of the following is an example of revenue in accounting?
a) Rent expense
b) Equipment purchase
c) Dividend payment
d) Service fees earned
d) Service fees earned
What is the primary characteristic of liabilities in accounting?
a) They represent ownership in the business.
b) They include the costs of goods sold.
c) They are future economic benefits.
d) They represent obligations of the business.
d) They represent obligations of the business.
Which of the following represents a direct cost associated with producing goods sold during a specific period?
a) Revenue
b) Equity
c) Cost of Goods Sold
d) Accounts Receivable
c) Cost of Goods Sold
What does the term ‘net income’ represent in accounting?
a) Total revenue minus total expenses
b) Total assets minus total liabilities
c) Total revenue minus total liabilities
d) Total expenses minus total assets
a) Total revenue minus total expenses - often referred to as Net Profit.
What do expenses represent in accounting?
a) Financial losses of the business
b) Revenue generated by the business
c) Assets owned by the business
d) Costs incurred by the business
d) Costs incurred by the business - leading to an increase in Net Profit and therefore Owners Equity.
Which of the following represents an example of an intangible asset?
a) Inventory
b) Accounts payable
c) Building
d) Goodwill
d) Goodwill
Goodwill is an intangible asset that accounts for the excess purchase price of another company. Items included in goodwill are items such as intellectual property and brand recognition, which are not easily quantifiable.
What is the formula for calculating owners equity in accounting?
a) Assets - Liabilities
b) Revenue - Expenses
c) Liabilities - Assets
d) Expenses - Revenue
a) Assets - Liabilities
