Unit 1, AOS 2 Accounting

0.0(0)
studied byStudied by 0 people
learnLearn
examPractice Test
spaced repetitionSpaced Repetition
heart puzzleMatch
flashcardsFlashcards
Card Sorting

1/56

encourage image

There's no tags or description

Looks like no tags are added yet.

Study Analytics
Name
Mastery
Learn
Test
Matching
Spaced

No study sessions yet.

57 Terms

1
New cards

Asset

is a present economic resource controlled by the entity as a result of past events.

2
New cards

Current asset

are cash and other types of assets held primarily for the purpose of sale or trading, or are reasonably expected to be converted to cash, sold or consumed by a business within 12 months after the end of the reporting period.

3
New cards

Non-current asset

are expected to be used by the business entity for a number of years and are not held for resale.

4
New cards

Liability

is a present obligation of the entity to transfer an economic resource as a result of past events.

5
New cards

Current liabilities

are obligations of the entity that are reasonably expected to be settled within 12 months after the end of the reporting period.

6
New cards

Non-current liabilities

are obligations of the entity that are not required to be settled within 12 months after the end of the reporting period.

7
New cards

Owner's equity

is the residual interest in the assets of the entity after deducting liabilities

8
New cards

Revenues

are increases in assets or decreases in liabilities that result in increases in owner's equity, other than those relating to contributions from the owner.

9
New cards

Expenses

are decreases in assets or increases in liabilities that result in a decrease in owner's equity, other than those relating to distributions to the owner.

10
New cards

Relevance (Q.C)

usefulness of financial information in helping users make decisions

11
New cards

Faithful representation (Q.C)

the requirement that financial information must accurately reflect economic events. Material should be free from error and bias

12
New cards

Comparabiltiy (Q.C)

the ability to contrast similar type of financial information effectively with other entities or over different reporting periods

13
New cards

Verifiability (Q.C)

the ability to ensure that different knowledgeable and independent observers can reach a consensus (arrive at the same conclusion) that a particular depiction of an event is faithfully represented. Maintained by retention of source documents used to record the transaction and checked through auditing

14
New cards

Timeliness (Q.C)

providing information to users as quickly as possible so that it remains useful for decision making

15
New cards

Understandability (Q.C)

financial information should be presented clearly and concisely, and headings and sub-headings should assist, so that users can easily understand it

16
New cards

Accounting entity assumption (AA)

the records of assets, liabilities and business activities of the entity are kept completely separate from those of the owner of the entity as well as from those of other entities

17
New cards

Accrual basis assumption (AA)

recording revenue when it's earned and expenses when they're incurred

18
New cards

Going concern assumption (AA)

a business will continue to operate, and isn't expected to be wound up in the near future

19
New cards

Balance Sheet

Assets, liabilities and Owner's Equity at a particular point in time

20
New cards

Classification

grouping together items that have some common characteristics

21
New cards

Ethics

the principles/values of right and wrong that guide/govern a person or business in making decisions

22
New cards

Receipt

A source document for cash coming into a business

23
New cards

Cheque butt

A source document for cash payments a business

24
New cards

EFT (electronic funds transfer)

Exchange of money by sending bank records via a computer network

25
New cards

Sales invoice

A source document for selling goods on credit to a customer. The business keeps a duplicate. Placed in the sales journal

26
New cards

Purchase invoice

A source document for buying goods on credit from a supplier. The business keeps the original. Placed in the purchase journal

27
New cards

Tax invoice

A source document that is used to provide evidence of transactions that include the GST

28
New cards

Memo

A source document. A note between the owner and accountant

29
New cards

Credit note

A source document that represents a return of inventory

30
New cards

Purchase order

A business document that requests inventory

31
New cards

Delivery docket

A business docket that lists items that have been provided to a business on delivery

32
New cards

GST

a 10% tax levied by the federal government on sales of goods and services. Divide by 11 if GST is included in the price

33
New cards

Cash receipts journal

a special journal used to record only cash receipt transactions. Uses receipts, bank statements and EFTs

34
New cards

Cash payments journal

a special journal used to record only cash payment transactions. Uses cheque butts, bank statements, EFTs

35
New cards

Sundries column

Infrequent transactions are recorded in this section when they do not belong in the other columns

36
New cards

Statement of receipts and payments

An accounting report which lists cash receipts and payments during a reporting period, the change in the bank balance, and the opening and closing bank balance

37
New cards

Credit transactions

The goods/services are supplied immediately, but payment follows at a later date. Uses an invoice

38
New cards

Credit terms

State the period of time offered to credit customers, the discount available and when the amount is due. Eg. 4/10, n/30

39
New cards

Subsidiary records

Additional accounting records. In this case, to keep information on acc rec and acc pay

40
New cards

Purchase journal

A special journal used to record only purchases on credit. Uses purchase invoices only.

41
New cards

Sales journal

A special journal used to record only sales on credit. Uses sale invoices only. Looks at sales/GST to accounts receivables

42
New cards

Cash Flow Statement

A financial report that shows the flow of money in and out of the business. Separates transactions in operating, investing and financing activities

43
New cards

Operating activities

Day to day cash transactions

44
New cards

Investing activities

Transactions involving buying or selling non-current assets with cash

45
New cards

Financing activities

Cash flows that result because of changes in a firm's financial structure. Eg. drawings of cash, cash contribution of capital, loan received, loan repayments

46
New cards

Liquidity

The firm's ability to meet its short term debts as they fall due

47
New cards

Working capital ratio

CA/CL this indicates a company's ability to cover short term liabilities, also called current ratio. Measure of a company's liquidity. The higher, the better. Eg. 1.5:1 is good

48
New cards

Income Statement

A financial report showing the revenue minus expenses for a period. Calculates the net profit (or loss)

49
New cards

Profitability

The business' ability to earn a profit, compared to assets, sales, OE. Expressed as a %

50
New cards

Non-financial indicators

eg. the number of complaints, the number of hours worked, hit on the business website, staff turnover, the state of the economy

51
New cards

Net profit margin

Profit / net sales. Looks at how well the business controls expenses and earns revenue

52
New cards

Gross profit margin

Gross profit / net sales. Looks at the mark up of a business

53
New cards

Benchmarks

Past periods, budgets, similar firms

54
New cards

Period assumption (AA)

The life of the business must be divided into 'regular intervals' of time to allow reports to be prepared.

55
New cards

Items not placed in the Income Statement

Loan, purchase of assets, GST, drawings, capital. Only place in R and E - nothing else

56
New cards

Items not placed in the Cash Flow Statement

Any transaction on credit (uses an invoice) any transaction that hasn't occurred (eg. delivery docket or order form)

57
New cards

Cash flow cover

a liquidity indicator that measures the number of times Net Cash Flows from Operations is able to cover average Current Liabilities