Flashcards
Chapters 1 & 2 - Accounting
Cards in this deck (25)
- 1What is accounting?- gathering financial information about the
transactions of a business from business
documents
- recording this info in various journals
- preparing financial reports based on these
records
- management evaluating the performance of the
business and making important decisions - 2users of accounting- management
- banks
- suppliers
- potential owners
- employees - 3accounting elementsRevene, expenses, assets, liabilities, owner's equity
- 4Revenuethe total amount of income generated by the sale
of goods and services related to the company's
primary operations (money in) - 5expensesmoney spent or the cost of operations (money
out) - 6assetsresources with economic value that a business
controls or owns that are a future economic
benefit - 7liabilitiessomething that a company owes, usually a sum of
money that is a future economic obligation - 8owner's equitya residual amount of money an owner puts into
their business
ASSETS - LIABILITIES - 9accounting assumptionsPAGE
Period
Accrual
Going concern
Entity - 10accounting entity assumptionthe requirement that a business must keep a set of
financial records separate to the owner or other
businesses
- enables users of accounting reports to make
decisions based on the performance of the
business - 11Qualitative characteristicsTURF CV
Timeliness
Understandability
Relevance
Faithful representation
Comparability
Verifiability - 12business activitiesany action taken by an entity for the purpose of
making a profit - 13entitya business, organisation or individual
- 14going concern assumptionthe belief that a business is expected to operate
into the future, and will continue forever
- enables businesses to recognise transactions
that occur over more than one reporting period
(credit transactions)
- enables the business to distinguish between an
asset and an expense
- an expense is consumed within the reporting
period, whereas an asset can provide economic
benefit to future reporting periods - 15acrrual basis assumptionstates that revenues should be recorded in the
reporting period, when they are earned and that
expenses are reported in the reporting period
that they are incurred in order to determine profit
- enables profit to be calculated based on the
revenues earned and expenses incurred for a
particular reporting period - 16period assumptionmeans a reporting period can be as short as the
owner likes but not exceed a year due to taxation
requirements
- the reporting period length should be
consistent over the life of the business so that
comparisons between reports can be made - 17business activity statementa form submitted to the Australian Taxation Offive
by buesiness entities to report their quarterly tax
obligations - 18timelinessmeans having information available for decision
makers in time to be capable of influencing their
decisions
- the older the infromation is, the less useful it is
for the decision maker - 19breachto break a rule
- 20understandabilitya qualitative characteristic that requires financial
information to be presented clearly and concisely
so that it is comprehensible to users of accounting
information
- not missing information and not containing
misleading information - 21relevancestates that information is relevant to a decision if it
helps users to confirm information about past
events and form predictions about the outcome
of future economic events - 22faithful representationassures users that the financial information
contained in the reports is complete, free from
bias (neutral) and without material error - 23comparabilitystates that information in accounting reports can
be useful when it can be compared with similar
information from different entities
- enables users to identify and understand
similarities and differences among items in reports
- changes in accountign procedure should also
be disclosed on the trports so that users can take
this into consideration when making comparisons - 24verifiabilitymeans that accounting information presented in
financial reports is considered verifiable if two or
more independent observers can include that the
reports (and transactions) faithfully represents the
actual events of the business
- upheld by referencing and maintaining source
documents and checking accuracy through
auditing
- if the information is not verifiable the users
would not be able to trust that the information is
faithful - 25ethical factors- costs of a decision to a business
- potential benefits to a business
- effect don't he reputation of a business
- potential environmental damage of business decisions
- financial and emotional effect on individuals, including owners, managers and consumers.
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- Year 11 Accounting Flashcards on Chapters 1 & 2 - Accounting , created by Bethany Ferraro on 22/02/2022.
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- Bethany Ferraro
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