Accounting

Question	Answer
The purpose of the Statement of Financial position (balance sheet)	To measure the business's assets, liabilities and owner's equity at a point in time.
Current assets	Assets which can will be turned into cash in or used in the next accounting period.
Non - current assets	Assets which will be retained in the business beyond the end of the next accounting period.
Current liabilities	Liabilities which the business expects to repay within the accounting period or have an obligation to provide goods and services for which customers have already paid.
Non - current Liabilities	Liabilities which will be paid over a period of time beyond the next accounting period.
Owner's equity	- capital (opening/closing) - net profit/loss - drawings
characteristics of an asset	Assets are resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. ( past, present, future.)
characteristics of a liability	A liability is a present obligation of the entity arising from past events, the settlement of which is excepted to result in an outflow from the entity of resources embodying economic benefits. ( past, present, future.)
Characteristics of income	Income is increases in economic benefits in the form of inflows or enhancements of assets or decreases in liabilities that result in increases in equity, other than owners contribution.
Characteristics of expenses	Expenses are decreases in economic benefits in the form of outflows or depletion's of assets or increases of liabilities that result in decreases in equity, other than drawing.
Accounting equation	assets = liabilities + equity
Accounting equation (expanded)	assets + expenses = liabilities + equity + income
Equity	Equity is the residual value of assets less liabilities, ( E=A-L ) it is the owners share of the business.
Net Profit or loss	Net Profit or loss is calculated by income - expenses. ( NP = I - Ex )
Capital expenditure	Creates an asset, future economic benefit, longer than 1 accounting period. (e.g. transportation/installation costs )
Revenue expenditure	Expenses from running the business not creating an asset, short term - within one accounting period. (e.g. repairs, electricity)
Depreciation	Depreciation is the systematic allocation of the depreciate amount of an asset over its useful life. ( Property, Plant, Equipment) Note : land is not depreciated because of scarcity.
Definition of accounting	Accounting is about communicating information to users so they can make informed decisions.
Definition of cash budgets	Predict the movements of cash received and paid for over a period of time.
Purpose of cash budgets	To show the expected receipts(sources) and payments (uses) of cash during the period and suggest the expected bank balance end of the period.
Components of cash budgets	- estimated receipts - estimated payments - surplus / deficit of cash - opening bank balance - closing bank balance
Purpose of Statement of Accounting Policies	To inform the users of financial statements which policies and concepts were used in the preparation of the financial statements and aid users in understanding those financial statements.
Components of Statement of Accounting Policies.	- Description of business - Measurement base used - Policies (and changes in policies ) used when preparing the statements.
Statement of cash flows	Shows movement of cash and change in bank account.
Example of Statement of Accounting Policies	1. These financial statements are prepared for Quick Smart Consultancy a sole proprietor business consultancy firm providing advice to business. 2. The measurement base used is historical cost. 3. Property, Plant, and Equipment are initially stated
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Accountants - Financial Accounting (or Chartered Accounting)	Analysing and interpreting the financial information, to assist in financial decision making.
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	Created by Hanel Blom over 9 years ago