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Accounting And Finance > Week 2 > Flashcards

Week 2 Flashcards

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1
Q

what is ethics in accounting

A

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

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2
Q

what is sustainability reporting

A

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

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3
Q

what has sustainability reporting led to

A

the triple bottom line

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4
Q

what is the triple bottom line

A

1: social
2: environmental
3: financial

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5
Q

what regulation system is used in AFF1000

A

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

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6
Q

what was used before the framework

A

GAAP (generally accepted accounting principles)

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7
Q

what are 6 concepts in the framework

A

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

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8
Q

what is a reporting entity

A

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

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9
Q

what are the 3 indicators of a reporting entity

A

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

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10
Q

what are the 2 assumptions

A

1: monetary unit assumption
2: economic entity assumption

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11
Q

what is monetary unit assumption

A

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

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12
Q

what is economic entity assumption

A

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

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13
Q

what are the 3 types of entities

A

1: proprietorship
2: partnership
3: company

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14
Q

what are features of proprietorships

A

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

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15
Q

what are features of partnerships

A

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

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16
Q

what are features of companies

A

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

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17
Q

what is recognition criteria?

A

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

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18
Q

what are the 2 recognition criteria

A

1: probable occurrence
2: reliable measurement

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19
Q

what is probable occurrence

A

more then 50% chance of occurring

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20
Q

what is reliable measurement

A

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

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21
Q

what are the 4 financial statements

A

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

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22
Q

what does income statement show

A

income and expenses and resulting profit or loss

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23
Q

what does statement of changes in equity show

A

summarises the change in owners equity

24
Q

what does the balance sheet show

A

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

25
Q

what does statement of cash flows show

A

summaries the cash inflows and outflows

26
Q

what are the 2 fundamental qualitative characteristics

A

1: relevance
2: faithful representation

27
Q

what is relevance

A

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

28
Q

what is faithful representation

A

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

29
Q

what are the 4 features of faithful representation

A

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

30
Q

what are the 4 enhancing qualitative characteristics

A

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

31
Q

what is comparability

A

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

32
Q

what is understandability

A

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

33
Q

what is timeliness

A

having information available before it loses ability to influence decisions

34
Q

what is verifiability

A

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

35
Q

what are the 2 qualitative constraints

A

1: materiality
2: balance between benefit and cost

36
Q

what is duality

A

every transaction has a dual affect

37
Q

what is the extended accounting equation

A

Assets = Liabilites + Owners Equity + Revenue - Expenses

38
Q

what does the extended equation show

A

illustrates the result of revenue and expenses

39
Q

what is the extended extended accounting equation

A

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

40
Q

what does the extended extended equation show

A

shows the impact of owners activites

41
Q

what is the account

A

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

42
Q

are assets, expenses and drawings treated the same way

A

yes

43
Q

how are assets,expenses and drawing treated

A

an increase in these accounts is debited

a decrease in these accounts is credited

44
Q

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

A

yes

45
Q

how are liabilites, income and owners equity treated

A

an increase in these accounts is credited

a decrease in these accounts is debited

46
Q

what is the normal balance for assets, expenses and drawings

A

DEBIT

47
Q

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

A

CREDIT

48
Q

what are the 4 steps in the recording process

A

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

49
Q

what is the journal

A

the book of original entry

50
Q

what is the features of a journal entry

A

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

51
Q

what is a journal entry with 3 or more accounts invloved

A

compound

52
Q

what is the ledger

A

the entire group of accounts by a business

53
Q

how should ledgers be ordered

A

the order of what is presented in financial statements

54
Q

what is the procedure of posting from journal to ledger

A

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

55
Q

what is the chart of accounts

A

list accounts and account numbers to help identify them in ledger

Accounting And Finance (8 decks)

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