Wk 1 L1 Intro & Key Terms

Question 1

What is accoutning?

Answer 1

-Collecting & Recording Data
-Processing data to produce useful info
-Communicating and reporting info to interested parties

Question 2

Why is accounting undertaken?

Answer 2

-Record money in and out of a business
-Support decision making
-Report financial state
-Help plan future activities

Question 3

Who uses accounting information?

Answer 3

-Managers
-Investors
-Employees
Suppliers
-Community

Question 4

Who provides accounting information?

Answer 4

-Sole Traders
-Partnerships
-Limited companies
-Clubs & Societies
-Public sector bodies

Question 5

What are the 2 types of accoutnting?

Answer 5

1. Management Accounting
2. Financial Accounting

Question 6

Define Management accounting

Answer 6

Production of financial information internal to the business to help with planning, control and decision making, produced as and when needed, financial and non-finacial info

Question 7

Define Financial Accounting

Answer 7

Recording transactions in an organisation and putting together in an annual financial report for anyone to read also helping shareholders see how managers use their money, historical record, mostly financial records

Question 8

What must accounting information be?

Answer 8

-Relevant
-Reliable
-Verifiable
-Timely
Comparable
-Understandable

Question 9

Limitations of accounting information?

Answer 9

-Reflects the past
-Inexact science
-Non quantitative items
-Unstable currecny
-Input quality effects output

Question 10

What is an Income Statement?

Answer 10

Records income and expenses of a business over time, profit and loss

Question 11

What is a Statement of Financial Position?

Answer 11

-Records assets/liabilities & capital at a point in time
-Interested in the strengths and stability in an organisation
-What a business owes/is owed

Question 12

Define Income

Answer 12

What the business earns from the sale of goods/services

Question 13

Define Expense

Answer 13

What it costs businesses to earn the income

Question 14

Define Asset

Answer 14

Resources avaiable to a business

Question 15

Define Liability

Answer 15

Amounts owed by a business

Question 16

Define Capital

Answer 16

Amount invested in a business by the owner

Question 17

Define Current Asset

Answer 17

An asset whose benefit will be used up in the current accounting period (eg Cash)

Question 18

Define Non-Current Asset?

Answer 18

An asset that will bring a firm economic benefit for more than 1 accounting period

Question 19

Define Non-Current Liability

Answer 19

Amounts due to third parties that are bit liable for repayment within the year (eg Bank Overdraft)

Question 19

Define Current Liability

Answer 19

Debts owed by the organisation that will be paid back within a year

Question 20

What are the Accounting Conventions?

Answer 20

-Going Concern
-Prudence
-Consistency
-Business entity

Question 21

Define Going Concern?

Answer 21

Businesses will continue operations for the forseeable future, no need to liquidate

Question 22

Define Prudence

Answer 22

An atitude/mindset, exercises caution, profit should not be recorded until realised.

Question 23

Define Consistency

Answer 23

Consistent treatments in accounts for items within each accounting period, treat items the same over time.

Question 24

Define Business Entity

Answer 24

For accounting purposes business & owners are treated as seperate and dusting.