1180105
Description
Flashcards by Olivia McKenzie, updated more than 1 year ago
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Created by Olivia McKenzie
over 10 years ago
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| Question | Answer |
| Assets (past) | As a result of a PAST TRANSACTION |
| Assets (present) | Business or owner has PRESENT CONTROL of the Asset |
| Assets (future) | The Asset will result in a FUTURE ECONOMIC BENEFIT that FLOWS (inflow) TO THE ENTITY |
| Liabilities (past) | As a result of a PAST TRANSACTION |
| Liabilities (present) | Business has a PRESENT OBLIGATION |
| Liabilities (future) | The Liablilty will result in a FUTURE ECONOMIC BENEFIT THAT FLOWS (outflow) FROM THE ENTITY |
| Equity | Assets - Liabilities |
| Income | Income results in an increase in Assets or a decrease in Liabilities which increases income, increases profit which increases Equity and is not a contribution by the owner |
| Expenses | Expenses create a decrease in Assets or an increase in Liabilities increasing expense and decreasing profit, which decreases Equity and is not drawings by the owner |
| Accounting Entity | The business's financial affairs must be kept separate from the financial affairs of the owner DRAWINGS If the owner uses business money to pay for personal expense then it is recorded and reported as drawings |
| Monetary measurement | The value of all transactions is measured and reported in NZ$ terms This makes the report easily comparable from one year to the next |
| Historical cost | All transaction are recorded at the amount paid to acquire (purchase) them. ( i.e. the purchase price excluding GST) |
| Going concern | The financial statements are prepared on the assumption that the business will CONTIUE INTO THE FORSEEABLE FUTURE |
| Period reporting | The business's life of financial activity is divided into EQUAL TIME PERIODS (accounting periods) in order to measure profit and performance and to be able to compare from one period to the next |
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