poa theorys might come out in o Level

what is a role of accounting?

accounting provides accounting information for stakeholders to make decisions

State the difference between a trading business and service business

Trading business buys and sells good to earn income. However, a service business provide services to customers to earn income.

features of sole proprietorship

it is owned by one person who has full control over business

access to funds Is limited to personal funds, as banks are less likely to earn money

it has unlimited liability as owner is personally liable for all business, debts, and losses

advantages Of a sole proprietorship

The owner has full control over business

definition of accounting entity

Activities of business are separate from activities of owner business only record activities of business, and all transactions are to be recorded from viewpoint of the business

accounting period

The life of a business is divided into regular time intervals for reporting business

definition of going concern

A business is assumed to have an indefinite economic life, unless there is credible evidence that it may close down

definition of matching theory

Expenses incurred must be match against income earn in the same period to determine the profit for that period

definition of objectivity theory

Accounting information recorded must be supported by reliable and Verifiable evidence, so that financial statements will be free from options and biases

definition of Prudence theory

The accounting treatment chosen should not overstay assets and profits, nor understate, liabilities and losses

what is a trial balance?

it is a list of all ledger accounts, and their ending balances at a point in time

Purposes for preparing a trial balance

It helps to check Arithmetic accuracy In Recording

it facilitates the preparation of the financial statements

define non-current asset

Resources owned or controlled by the business that are expected to provide benefits beyond one financial year

define current assets

resources owned or controlled by the business that are expected to provide benefits that will be used up within the next financial year or assets that can be converted to cash easily

define non-current liabilities

Obligations owed by Business which are due for settlement beyond one financial year

define current liabilities

Obligations owed by business which are due for settlement within the next financial year

State the meaning of income received in advance

It is the amount of income Received, but not yet earned

State, the meaning of income receivable

It is the amount of income earned, but not yet received

set the meaning of prepaid expense

It is the amount of expense paid, but not incurred

State the meaning of expense payable

Is the amount expense incurred, but not Yet paid

State two ways Of internal control to safeguard cash balances

segregation of duties. Business must ensure that cash handling and cash recording duties are performed by different employees.

Custody of cash. Business must Secure, cash and cheques in a locked storage