vocab

Question 1

what is accounting

Answer 1

is the proces of identifying, preparing, measuring and communicating economic information to permit informed judgements and decisions by the users of the information

Question 2

what is the accounting entity concept

Answer 2

the financial affairs of the owner of a business must be kept seperate and distinct from the financial affairs of the business.

sandras personal financial affairs must be kept seperate from the financial affairs of super washes. personal expenses are to be recorded as drawings

Question 3

What is monetary measurement

Answer 3

all transactions, assets, liabilities, incomes, expenses and equity are recorded and reported in NZ dollars

in the financial reports of super washes only items which can be measured in terms of $NZ will be reported, for example Premises $80,000

Question 4

where are personal affairs recorded

Answer 4

when preparing the accounting records of a business, only the business’s transactions are included. Personal expenses of the owners are recorded as drawings

Question 5

what happens if a transaction cannot be expressed in money values

Answer 5

it will not be recorded in the accounting records. Any item in another currency will be converted to the local currency (NZ dollars)

Question 6

what is a historical cost

Answer 6

transactions are recorded at the original acquisition cost to the business at the time of purchase. meaning that assets are recorded at their original price when acquired, not at the current value as the business has no intention of selling the item.

super washes will record the vehicles at their original acquisition cost of $20,000

Question 7

what is period reporting

Answer 7

the life of a business is divided into equal periods in order to measure profit and position, and to compare performance to previous periods

super washes prepares its finanical reports on 31 march 2017 to measure profit and position, in order to compare preformance to previous periods

Question 8

accrual basis

Answer 8

transactions are reported in the financial statements of the period they relate to, regardless of when cash is exchanged

super washes are to report transcations in the financial statements of the period they relate to. the wages owing will be reported as an expense and as a liability

Question 9

going concern

Answer 9

it is assumed that the business will continue to operate into the foreseeable future

super washes financial reports are prepared on the assumption that super washes will continue to pperate into the forseeable future