accounting exam

Relevance QC

Information is relevant if it is helpful for decision making.

Faithful Representation QC

Information is complete, unbiased, and accurate.

Comparability QC

Information can be compared across time or between businesses.

Verifiability QC

Information can be confirmed with evidence.

Timeliness QC

Information is provided quickly.

Understandability QC

Information is clear and easy to interpret.

Net Profit Ratio

How much profit is kept after expenses; Improved by reducing expenses, reducing cost of goods sold, increasing revenue.

Gross Profit Ratio

How much profit a business makes from selling goods before expenses; Improve by decreasing cost of goods sold or increasing prices.

Debt Ratio

How much of the business is funded by debt; Improved by paying off loans faster, avoid taking more loans, increase owner investment.

Accounting

The process of recording, reporting, and analysing financial transactions of a business to help people make informed decisions.

Current Assets

Expected to be used or turned into cash within a year.

Non-Current Assets

Held or used for more than a year.

Current Liability

Something owed within the next year (365 days).

Non-Current Liability

Something owed that is due after 365 days.

Revenue

Income earned by the business from its operations.

Expense

Costs the business pays to earn revenue.

Asset

Anything the business owns or controls that provides future value.

Liability

Debts the business owes.

Owner's Equity

The owner’s investment into the business.

Internal Users (of Accounting Reports)

Business owners and managers.

External Users (of Accounting Reports)

Banks, investors, suppliers.

Receipt

Proof of receiving cash.

Invoice

Proof of a credit sale.

Credit Note

Proof of a return/reduction in amount owed.

Cheque Butt/Bank Statement

Proof of payment made.

EFT Receipt

Electronic transfer evidence.

Memo

Internal note for non-cash transactions (owner withdrawal).

Entity Assumption

Business is separate from owners.

Accrual Basis Assumption

Revenue and expenses when they are earned or used, not when cash is paid or received.

Going Concern Assumption

Assume business will keep going and won't shut down.

Period Assumption

Reports are made for a set period/time (monthly, yearly).

What us accounting assumption

rules for how reports are prepared

what is qualitative characteristics

features or quality that makes financial reports useful for those reading and also shows how it is presented