Unit 1 Acc Chapter 01 Glossary

Question 0

Financial data

Answer 0

Raw facts and figures upon which financial information is based

Question 1

Accounting

Answer 1

The collection, recording and reporting of financial information to assist business owners in decision-making

Question 2

Financial Information

Answer 2

Financial data which has been sorted, classified and summarised into a more usable and understandable form

Question 3

Transaction

Answer 3

An agreement between two parties to exchange goods or services for payment

Question 4

Source Documents

Answer 4

The pieces of paper that provide both the evidence that a transaction has occurred, and the details of the transaction itself

Question 5

Recording

Answer 5

Sorting, classifying and summarising the information contained in the source documents so that it is more usable

Question 6

Reporting

Answer 6

The preparation of financial statements that communicate financial information to the owner

Question 7

Advice

Answer 7

The provision to the owner of a range of options appropriate to their aims/objectives, and recommendations as to their suitability

Question 8

Accounting Principles

Answer 8

The generally accepted rules which govern the way accounting information is recorded

Question 9

Entity Principle

Answer 9

The business is separate from the owner and other entities, and its records should be kept on this basis

Question 10

Going Concern Principle

Answer 10

The life of the business is assumed to be continuous, and its records are kept on that basis

Question 11

Reporting Period Principle

Answer 11

The life of the business must be divided into
‘periods’ of time to allow reports to be prepared, and the accounting records should reflect the reporting period in which a transaction occurs

Question 12

Historical Cost Principle

Answer 12

Transactions should be recorded at their original purchase price, as this value is verifiable by source document evidence

Question 13

Consistency principle

Answer 13

The business should use the same accounting methods to allow for the comparison of reports from one period to the next

Question 14

Conservatism Principle

Answer 14

The business should use the same accounting methods to allow for the comparison of reports from one period to the next

Question 15

Monetary Unit Principle

Answer 15

All items must be recorded and reported in the currency of the country of location where the reports are being prepared

Question 16

Qualitative Characteristic

Answer 16

The qualities of the information in accounting reports

Question 17

Relevance Characteristic

Answer 17

Reports should include all information which is useful for decision-making

Question 18

Reliability Characteristic

Answer 18

Reports should contain information verified by source document evidence so that it is free from bias

Question 19

Comparability Characteristic

Answer 19

Reports should be able to be compared over time through the use of consistent accounting procedures

Question 20

Understandability Characteristic

Answer 20

Reports should be presented in a manner that makes it easy for the user to comprehend their meaning