unit 1: Accounting process

Question 1

Financial data:

Answer 1

It is the facts and figures that information is based, for example, a purchase of a ticket from Melb to Syd on Qantas for $200 financial data.

Question 2

Accounting;

Answer 2

It is a management info system that involves the collecting, sporting, classifying and recording of financial date to produce and report financial info to assist business owners in decision making.

Question 3

Current asset

Answer 3

A present economic recourse controlled by the entity (as a result of past events) that is reasonably expected to be converted to cash, sold or consumed within the next 12 months after the end of the reporting period.

Question 4

Current liability

Answer 4

A present obligation of the entity (arising from past events) that are reasonably expected to be settled with a transfer of an economic resource within the next 12 months.

Question 5

Non-current asset

Answer 5

A present economic resource controlled by the entity (as a result of past events) that is not held for resale and is reasonable expected to be used for more than the next 12 months after the end of the reporting period.

Question 6

Non-current liability

Answer 6

A present obligation of the entity (arising from past events) that are not expected to be settled with a transfer of economic resource within the next 12 months after the end of the reporting period.

Question 7

types of source documents

Answer 7

Receipt
Cheque butt
invoice
memo
bank statement

Question 8

Accounting process

Answer 8

Source document-> recording-> reporting-> advice.

Question 9

Source documents

Answer 9

Provides evidence that a transaction has occurred and details of the transaction.

Question 10

recording

Answer 10

sorting, classifying + summarising data

Question 11

reporting

Answer 11

preparation of financial that communicates with owner.

Question 12

working capital ratio=

Answer 12

current assets/ current liabilities

/= divided by

Question 13

debt ratio=

Answer 13

Total Liabilities/ total assets x 100

Question 14

Liquidity

Answer 14

The ability of the business to meet its short term debt as they fall due

Question 15

stability

Answer 15

The ability of a business to meet its debts and continue operation in the long term.

Question 16

Net profit margin

Answer 16

NPM= net profit/ net sales x 100.

It is a financial indicator that provides an indication of the profitability of the buisness.

Question 17

strategies to improve profitability

Answer 17

1. negotiate with existing external suppliers to secure cheaper prices.
2. Change suppliers to access a cheaper price for supplies.
3. Buy materials in bulk in order access more discounts.
4. review staff rostering in order to minimize rostering expense.
5. Effective marketing, advertising to boost sales.
6. Improve service delivery in order to boost word of busness.

Question 18

Structure for cash and profit structure.

Answer 18

Cash and profit are two different measures of performance. Net profit is revenues earned minus expenses incurred, whilst net cash is cash receipts minus cash payments. There are some items that will impact net profit but not net cash and vice versa. One example is drawings of 2000$, as this is a cash payment that has contributed to a cash deficit, however, it is not classified as an expense.