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principles of accounts > WA1 revision > Flashcards

WA1 revision Flashcards

1
Q

what is the accounting equation?

A

assets = liabilities + equity

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2
Q

what are assets?

A

assets are resources a business owns or controls that are expected to provide future benefits

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3
Q

what are liabilities?

A

liabilities are obligations owed by a business to others that are expected to be settled in the future

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4
Q

what is equity?

A

equity is the claim by the owners on the net assets of the business
or
the amount of cash and other assets contributed by the owners and the profit generated by the business
or
the amount owed by the business to the owner of the business

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5
Q

what is capital?

A

capital is resources contributed by the owner to the business

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6
Q

how do we calculate profit or loss?

A

income - expenses

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7
Q

what is drawings?

A

amount of cash or other assets of the business taken by the owner for personal use

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8
Q

what is the equation for equity?

A

equity = capital + profit / loss - drawings

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9
Q

how does equity increase?

A

when the owner contributes assets into the business

business makes profits

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10
Q

how does equity decrease?

A

owner withdraws assets from the business for personal use (drawings)
business makes losses

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11
Q

what is diviends?

A

a portion of retained earnings that is distributed to shareholders

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12
Q

what is income?

A

income refers to amounts earned through the activities of a business.
income comprises of revenue and other income

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13
Q

what are expenses?

A

expenses are costs incurred in the operation of a busines to earn income in the same accounting period
or
cost of goods and services or benefits used up during business operations

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14
Q

how do we calculate liability?

A

assets - equity

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15
Q

office equipment

A

non-current asset

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16
Q

plant and equipment

A

non-current asset

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17
Q

fixtures and fittings

A

non-current assets

18
Q

motor vehicles

A

non-current assets

19
Q

inventory

A

current asset

20
Q

trade recievables

A

current asset

21
Q

cash at bank

A

current asset

22
Q

cash in hand

A

current asset

23
Q

mortgage loan

A

non-current liability

24
Q

loan from bank

A

non- current liability

25
Q

trade payables

A

current liability

26
Q

bank overdraft

A

current liability

27
Q

what is a trading business?

A

buys from suppliers and sells goods to customers

28
Q

what is a service business?

A

provides service to its customers

29
Q

what are some examples of a trading business?

A

bookshops, supermarkets

30
Q

what are some examples of a service business?

A

tuition centres, hair salons

31
Q

what is a sole proprietorship?

A

a sp is owned by one person who contributes capital to set up the sp.
when the sp incurs debts and losses, the sole owner is obliged to pay them using his or her personal assets.
banks and other lenders are less willing to lend money to the sp, due to the lack of personal assets that can serve as collateral

32
Q

what is a limited liability partnership?

A

a llp is owned by 2 or more partners where each partner contributes capital to set up the llp.
the control over the llp is shared among the partners with at least one partner heavily involved in running the business.

33
Q

what is a private limited company?

A

a plc is owned by 50 or less shareholders where each shareholder buys shares and contributes capital. the shareholders have no control over the running of the business unless they are part of the management team. the company hires professionals to manage the business on behalf of shareholders.

34
Q

how can an accountant exercise integrity?

A

by being straightforward and honest in all professional relationships

35
Q

how can accountants remain objective?

A

by not letting bias, conflict of interest, or the undue influence of others override his or her professional judgement

36
Q

why is it important for accountants to have integrity and remain objective?

A

as accountants provide information to stakeholders for decision making purposes, the information needs to be truthful and accurate. accountants who do not have integrity and is not objective may provide information that mislead users to make poor decisions. thus, it is important for accountants to have integrity and be objective.

37
Q

property

A

non-current asset

38
Q

profit

A

owner’s equity

39
Q

capital

A

owner’s equity

40
Q

loss

A

owner’s equity

41
Q

cost of sales

A

owner’s equity

42
Q

what is the order that assets need to written in the statement of financial position?

A 
current assets
inventory
trade receivables
other receivables
cash at bank
cash in hand

principles of accounts (1 decks)

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