Accounting AOS 2

Qualitative characteristics T.U.R.F.C.V 

Timeliness, Understandability, Relevance, Faithful representation, Comparability, and Verifiability.

Accounting assumptions P.A.G.E 

Period assumption, Accrual assumption, Going concern assumption, and entity assumption.

Timeliness

Provide information as quickly as possible to remain useful for decision making. For example, an owner needs to know promptly if business costs are escalating.

Understandability

Financial information should be presented clearly and concisely, with headings and subheadings that assist in user understanding.

Relevance

The usefulness of financial information in aiding users to make decisions.

Faithful representation

Financial information must accurately reflect economic events and assure users that the info presented is complete, free from material error, and neutral.

Comparability

The ability to compare similar types of financial information effectively with other entities or over different reporting periods to identify and understand similarities and differences.

Verifiability

Financial information should allow knowledgeable and independent observers to reach a consensus that an event is faithfully represented, supported by source documents for evidence and accuracy.

Period assumption

Financial activities are recorded and reported for a specific period to obtain comparability.

Accrual assumption

Revenue is recorded when earned and expenses when incurred.

Going concern assumption

A business will continue to operate and is not expected to be wound up in the near future.

Entity assumption

The records of assets, liabilities, and business activities of an entity are kept completely separate from those of the entity and other entities.

What is GST?

GST (Goods and Services Tax) is a broad-based tax of 10% on most goods and services consumed in Australia.

Who pays GST?

Consumers of goods and services pay the burden of GST.

What is the role of businesses in GST?

Businesses collect GST for the government and claim credits on their GST payments.

What is GST payable?

GST payable is the GST owed to the ATO when the GST received on sales is greater than the GST paid, classified as a current liability.

What is GST receivable?

GST receivable is the GST owed to the business by the ATO when the GST paid to suppliers is greater than the GST received, classified as a current asset.

What is a GST settlement?

GST settlement is a payment made to the ATO to settle GST payable.

What is a GST refund?

A GST refund is a cash receipt from the ATO to clear GST receivable.

How to calculate GST from selling price excluding GST?

Multiply the selling price excluding GST by 0.1.

How to calculate GST from total price including GST?

Divide the total price including GST by 11.

Accounting process

1. Business documents: input stage  

2. Record: processing stage  

3. Report: output stage 

4. Provide advice  

 

GST payable

GST owed to the ATO when the GST received on sales is greater than the GST paid; classified as a current liability.

GST settlement

A payment made to the ATO to settle GST payable.

GST receivable

GST owed to the business by the ATO when the GST paid to suppliers is greater than the GST received on sales; classified as a current asset.

GST refund

A cash receipt from the ATO to clear GST receivable.

Calculating GST from selling price excluding GST

Multiply the selling price excluding GST by 0.1 to find GST.

Calculating GST from total price including GST

Divide the total price including GST by 11 to find GST.

What are business documents?

Evidence of transactions and processes in business that support verifiability and faithful representation.

What are source documents?

Business documents that are the source of financial data and indicate a transaction has occurred, e.g., bank statement or receipt.

What is a memo?

A note used to record internal, non-cash transactions, such as when an owner contributes a non-current asset to the business.

What is a credit note?

A document issued for the return of inventory.

What is a statement of account?

A business document issued to credit customers or suppliers summarizing transactions between them.

What is a receipt?

A business document used to verify that cash has been received from outside the business.

What are electronic transfers of funds?

Online cash transactions, also known as EFT (Electronic Funds Transfer).

What is a purchase invoice?

A document indicating a business is buying on credit from suppliers (accounts payable), meaning the business has yet to pay.

What is a sales invoice?

A document indicating a business is selling on credit to customers (accounts receivable), meaning the customer has yet to pay.

What is a tax invoice?

Any document that includes GST and indicates a transaction involving GST.

What are credit terms?

Details about when an amount is due, which may include a discount if paid within a certain time frame.

What are order forms?

Documents used to request goods.

What are quotes?

Estimates of costs provided prior to a transaction.

What is a shipping confirmation?

A document confirming that goods have been shipped.

What is a delivery docket?

A document included with goods upon arrival.

What is a Sales Journal?

A Sales Journal is an accounting record specifically used to document all credit sales transactions made to customers, helping track amounts owed by clients.

What is a Purchase Journal?

A Purchase Journal is an accounting record used to log all credit purchases made from suppliers, allowing businesses to monitor their accounts payable.

statement of account

a document that summarizes all transactions associated with accounts payable or accounts receivable