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Erstellt von Olivia Gniadek
vor mehr als 8 Jahre
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Frage | Antworten |
Accounting Principles | - Conservatism - Historical Cost - Entity - Reporting Period - Monetary Unit - Consistency - Going Concern |
Conservatism | Losses should be recorded when probable, but gains are only recorded when certain, so that liabilities are not understated and assets are not overstated. |
Historical Cost | Transactions should be recorded at their original purchase price, as this value is verifiable by source document evidence. |
Entity | The business is separate from the owner and other entities and its records should be kept on this basis. |
Reporting Period | The life of the business is divided into 'periods' of time. Records should reflect the 'period' in which the transaction occurs. |
Monetary Unit | All items must be recorded and reported in the currency of the country in which the reports are prepared. |
Consistency | Reports should be able to match up to each other over time through the use of consistent accounting procedures. |
Going Concern | The life of a business is assumed to be continuous and its records are kept on the basis. |
Qualitative Characteristic | - Reliability - Relevance - Understandability - Comparability |
Reliability | Reports should contain information verified by source document evidence so that it is free from bias. |
Relevance | Reports should include all information that is useful for decision making. |
Understandability | Reports should be presented in a manner that makes it easy for the user to comprehend their meaning. |
Comparability | The business should use the accounting methods to allow for the comparison of reports from one period to the next. |
The Accounting Process | The process of turning financial data into financial information. Stage 1: Collecting Source Documents Stage 2: Recording Stage 3: Reporting Stage 4: Advice |
Stage 1: Collecting Source Documents | The input stage where business collects data relating to its transactions. |
Source Documents | The pieces of paper that provide the evidence that a transaction has occurred and the details of the transaction itself. Eg: - receipts - cheque butts - invoices - memos - bank statements |
Stage 2: Recording | The processing stage where information must be recorded. |
Recording | Sorting classifying and summarising the information in source documents so it is more useable. Eg: - journals (grouping common transactions) - stock cards (tracking movements of stock) |
Stage 3: Reporting | The output stage where information generated is reported to the owner. |
Reporting | The preparation of financial statements that communicate financial information to the owner so decisions can be made. 3 General Purpose Reports: - statements of receipts and payments - income statement - balance |
Stage 4: Advice | Accountant gives advice based on information from reports. |
Advice | Provision to the owner of a range of options appropriate to their aims/objectives and recommendations as to their suitability. |
Asset | A resource controlled by the entity (as a result of past events), from which future economic benefits are expected. Current: - Cash on hand - Stock of supplies - Debtors Non-current: - Equipment - Premises - Vehicles |
Liabilities | A present obligation of the entity (as a result of past events), the settlement of which is expected to result in an outflow of economic benefits. Current: - Creditors - Bank overdrafts - Wages Non-current: - Mortgages |
Owner's Equity | The residual interest if the assets of the entity after the liabilities are deducted. Eg: Capital |
Accounting Equation | Assets = Liabilities + Owners Equity Owners Equity = Assets - Liabilities |
Transactions | Double Entry Accounting 1. Every transaction will affect at least 2 items in the accounting equation. 2. After recording these changes, the accounting equation must still balance. |
Classified Balance Sheet | Grouping together items that have some common characteristics in order to improve the usefulness of information. |
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