Week 2

Question 1

what is ethics in accounting

Answer 1

ethics is standards that need to be upheld in reporting financial information

Question 2

what is sustainability reporting

Answer 2

information that is not just based on finances but social and environmental performance as it adds value to business

Question 3

what has sustainability reporting led to

Answer 3

the triple bottom line

Question 4

what is the triple bottom line

Answer 4

1: social
2: environmental
3: financial

Question 5

what regulation system is used in AFF1000

Answer 5

the framework for the preparation and presentation of financial statements (The Framework)

Question 6

what was used before the framework

Answer 6

GAAP (generally accepted accounting principles)

Question 7

what are 6 concepts in the framework

Answer 7

1: what a reporting entity is
2: assumptions
3: types of entities
4: accounting elements
5: recognition of elements
6: 4 financial statements

Question 8

what is a reporting entity

Answer 8

an entity in which it is reasonable to expect the existence of users who depend on financial statements for information to help them make financial decisions

Question 9

what are the 3 indicators of a reporting entity

Answer 9

1: separation of management from economic interest
2: economic or political influence
3: financial characteristics (large entity)

Question 10

what are the 2 assumptions

Answer 10

1: monetary unit assumption
2: economic entity assumption

Question 11

what is monetary unit assumption

Answer 11

only transaction data expressed in terms of money can be included in financial records

Question 12

what is economic entity assumption

Answer 12

activities of entity be kept separate and distinct from activities of owner

Question 13

what are the 3 types of entities

Answer 13

1: proprietorship
2: partnership
3: company

Question 14

what are features of proprietorships

Answer 14

1: owned by 1 person
2: small amount of start up capital needed
3: owner receives profits liable for losses

Question 15

what are features of partnerships

Answer 15

1: owned by 2 or more people
2: same as proprietorships except spread between partners

Question 16

what are features of companies

Answer 16

1: separate legal entity
2: ownership divided into shares
3: shareholders have limited liability
4: companies have unlimited life

Question 17

what is recognition criteria?

Answer 17

recognition is the process of incorporating in the finanical statements an item that meets the definition of an element

Question 18

what are the 2 recognition criteria

Answer 18

1: probable occurrence
2: reliable measurement

Question 19

what is probable occurrence

Answer 19

more then 50% chance of occurring

Question 20

what is reliable measurement

Answer 20

an item has a cost or value that can be measured reliably

Question 21

what are the 4 financial statements

Answer 21

1: Income Statement
2: statement of changes in equity
3: statement of financial position (balance sheet)
4: statement of cash flows

Question 22

what does income statement show

Answer 22

income and expenses and resulting profit or loss

Question 23

what does statement of changes in equity show

Answer 23

summarises the change in owners equity

Question 24

what does the balance sheet show

Answer 24

reports value of assets, liablities and owners equity at a specific date

Question 25

what does statement of cash flows show

Answer 25

summaries the cash inflows and outflows

Question 26

what are the 2 fundamental qualitative characteristics

Answer 26

1: relevance 2: faithful representation

Question 27

what is relevance

Answer 27

financial information must have a quality that influences users of economic data by helping them make predictions and confirming past evaluations

Question 28

what is faithful representation

Answer 28

information is free from material error and bias and represent faithfully the transactions it claims to represent

Question 29

what are the 4 features of faithful representation

Answer 29

1: substance over form 2: neutrality 3: completeness 4: accuracy

Question 30

what are the 4 enhancing qualitative characteristics

Answer 30

1: comparability 2: understandabilty 3: timeliness 4: verifiability

Question 31

what is comparability

Answer 31

users need to be able to compare external reports to compare entities over time

Question 32

what is understandability

Answer 32

users with a solid financial background must be able to understand the information in reports

Question 33

what is timeliness

Answer 33

having information available before it loses ability to influence decisions

Question 34

what is verifiability

Answer 34

different observers should reach agreement over what is presented in financial statements

Question 35

what are the 2 qualitative constraints

Answer 35

1: materiality 2: balance between benefit and cost

Question 36

what is duality

Answer 36

every transaction has a dual affect

Question 37

what is the extended accounting equation

Answer 37

Assets = Liabilites + Owners Equity + Revenue - Expenses

Question 38

what does the extended equation show

Answer 38

illustrates the result of revenue and expenses

Question 39

what is the extended extended accounting equation

Answer 39

Assets = Liabilites + Owners Equity + Revenue - Expenses + Additional Capital - Distributions

Question 40

what does the extended extended equation show

Answer 40

shows the impact of owners activites

Question 41

what is the account

Answer 41

an account is an individual accounting record of increases and decreases in a specific asset, liability or owners equity item

Question 42

are assets, expenses and drawings treated the same way

Answer 42

yes

Question 43

how are assets,expenses and drawing treated

Answer 43

an increase in these accounts is debited | a decrease in these accounts is credited

Question 44

are liabilities, income and owners equity treated in the same way

Answer 44

yes

Question 45

how are liabilites, income and owners equity treated

Answer 45

an increase in these accounts is credited | a decrease in these accounts is debited

Question 46

what is the normal balance for assets, expenses and drawings

Answer 46

DEBIT

Question 47

what is the normal balance of liabilites, income and owners equity

Answer 47

CREDIT

Question 48

what are the 4 steps in the recording process

Answer 48

1: identifty the transaction from source doucments 2: analyse each transaction for its effects on the accounts 3: enter transaction information in journal 4: transfer journal information into the ledger

Question 49

what is the journal

Answer 49

the book of original entry

Question 50

what is the features of a journal entry

Answer 50

1: date of transaction 2: accounts/amounts to be debited/credited 3: explanation of transaction

Question 51

what is a journal entry with 3 or more accounts invloved

Answer 51

compound

Question 52

what is the ledger

Answer 52

the entire group of accounts by a business

Question 53

how should ledgers be ordered

Answer 53

the order of what is presented in financial statements

Question 54

what is the procedure of posting from journal to ledger

Answer 54

in ledger enter appropriate accounts the amount debited/credited with explanation and date

Question 55

what is the chart of accounts

Answer 55

list accounts and account numbers to help identify them in ledger