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Accounting + Cost Control > Week 1 > Flashcards

Week 1 Flashcards

1
Q

Define Accounting

A

-Information system for measuring, processing and communicating financial information.

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2
Q

Why is accounting known as the “language of business”?

A

Helps a wide range of users make business decisions.

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3
Q

What are some examples of users of accounting ?

A

-individual investors, businesses, government agencies, lenders

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4
Q

Why are ethics and rules crucial in accounting an business?

A
  • considerations for all areas of accounting and business
  • need relevant and reliable info about companies to make decisions
  • proffesional accounting groups in canal assure that accountants behave ethically
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5
Q

What are the three basic forms of business organizations?

A

Proprietorship, Partnership and corporation.

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6
Q

What is a proprietorship from a business perspective?

A

Business where single owner = the proprietor.

-Each proprietorship is DISTINCT from owner

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7
Q

What is a proprietorship from legal perspective ?

A

Business = proprietor. if business cannot pay debts, lenders can take personal assets to pay the proprietorship debts.

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8
Q

What is a partnership from a business perspective?

A

Two or more individuals together as co owners, can be small or large.
Each owner = a partner.

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9
Q

What is a partnership from a legal perspective

A

Partner = Business, where lenders can take partners personal assets to pay the partnership debts ** except for LLP*

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10
Q

Whats LLP?

A

Limited Liability Partnership, meaning partners cannot make others MORE liable, and each partner is only liable for his and her actions.

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11
Q

What is a corporation from a business perspective ?

A

Business which is owned by shareholders, these shareholders own share of ownership within the business.

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12
Q

What is the dominant form of business organizations in canada?

A

Corporations

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13
Q

What is a corporation from a legal perspective ?

A

Formed when the federal government or provincial government approves the articles of its corporation.
Legal Entity which is SEPARATE + INDISTINCT from its owners

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14
Q

What does “artificial person” mean? How does it relate in a corporation?

A

Similar rights to an actual person.
This means it may buy/sell property
May enter into contracts, sue or become sued.

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15
Q

The life of an organization is limited by owners death or choices in a ..

A

Proprietorship and Partnership

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16
Q

The life of an organization is indefinite in a ..

A

Corporation

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17
Q

Are shareholders personally liable in a corporation?

A

NO!

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18
Q

What is the stable monetary unit assumption?

A

Allows for accountants to ignore effects of inflation in accounting records.
Accountants can ad/subtract dollar amount for activities which happened at different times.

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19
Q

What is the cost principle ? At what price is it recorded ?

A

Acquired assets/services which should be recorded a ACTUAL (historical cost).

20
Q

If the company receives a product/service at a bargain price, is the bargain price recorded?

A

Yes, record ACTUAL cost and NOT expected cost.

21
Q

What are the two restraints in accounting ?

A

1) Cost benefit Constraint

2) Materiality constraint

22
Q

What is the cost benefit constraint?

A

Producing accounting information HAS its own cost to a company!
Information produced should exceed cost of producing information.

23
Q

What is the materiality constraint?

A

Insignificant or small “materials” may be ignored. Piece of information = material.
Not defined by standards, but rather a matter of the information preparers judgement.

24
Q

What is the going concern?

A

Assume that the entity on which is reported is going to be in business in a foreseeable future (i.e buying land to build office space for a business which is stable)

25
Q

What is the economic entity assumption?

A

Keeps the sole proprietors business transactions separate from the owners personal transactions even though the sole proprietorship is NOT legally separate from the owner.

26
Q

What is an entity?

A

Organization/section of an organization that stands apart from the other individuals and organizations separately.

27
Q

What is the accounting equation ?

A

ASSETS = LIABILITIES + EQUITY

28
Q

What is important to remember about the accounting equation

A

Both sides must always be equal

29
Q

Whats included in assets?

A

Cash, Office Supplies and Land

30
Q

Whats included in Liabilities?

A

Debts that are payable to outside parties, often to an account.

31
Q

What is a creditor? What can they file?

A

Someone or company which has lent money to the business. May file a claim which is a legal right to part of the assets until the business pays the debts.

32
Q

What accounts are included in liabilities ?

A

Accounts Payable
Notes Payable
Salaries Payable

33
Q

What is owners equity/capital?

A

An owners claim to some of the entities, assets. All begins with an investment into the business.

34
Q

Whats the equity equation?

A

old + new investment capital + net income withdrawals = new

35
Q

What is revenue ?

A

Amounts earned by delivering goods and services to customers.

36
Q

What is the purpose of business ?

A

To increase owners equity through revenue.

37
Q

When owners equity increases, what happens ?

A

Assets increase, liabilities do not increase.

This means that owners share of business assets increase.

38
Q

What are withdrawals? what are they opposite of?

A

Amounts or resources removed from the business by the owner. Opposite of owner investments.

39
Q

What are expenses? What do they decrease ?

A

Occur from using/consuming assets or increasing liabilities in the course of delivering services or goods to customers.
Decrease owners EQUITY.

40
Q

A business owner invests cash into their business, where is this recorded on a transaction sheet?

A

Added Under CASH assets and OWNER EQUITY

41
Q

A business withdraws money for personal use, where is this recorded on a transaction sheet?

A

Subtracted from CASG and OWNER EQUITY

42
Q

A business purchases office supplies on an account, then pays half of it at a later day. Where is this recorded on a transaction sheet?

A

Initial purchase: Add to ACCOUNTS PAYABLE (Liabilities) + OFFICE SUPPLIES (Assets)

Payoff: Subtract from ACCOUNTS PAYABLE

43
Q

A business must pay rent and utilities,where is this recorded on a transaction sheet?

A

Subtracts from CASH (assets) and from OWNER EQUITY (liabilities)

44
Q

What key words are recorded on an Income statement ?

A

Revenue (service revenue)
Expenses (Rent/utilities)
Net Income

45
Q

What key words are recorded on a Statement of Owners Equity?

A

Capital of owner at beginning and end of month, measured by ADD (investment) and LESS (withdrawal)

46
Q

What key words are recorded on a balance sheet?

A

ASSETS, LIABILITIES OWNERS EQUITY.

Compare Total Assets vs total liabilities

Accounting + Cost Control (1 decks)

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