Basic Accy questions

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boon
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224182
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Basic Accy questions
Updated:
2013-06-17 17:33:32
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Accounting
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Week 1 of class
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  1. What is Accounting Concerned with?
    It is concerned with analysing and communicating financial information
  2. What are Assets?
    A resource controlled by the entity as a result of past events and from which future economic benefit are expected to flow to the entity
  3. What are Liabilities?
    A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity (economic benefits)
  4. What is Owners Equity?
    The residual interest in the asset of the entity after deducting all its liabilities.
  5. What is the accounting equation
    Assets - Liabilities = Owners Equity
  6. What are the two accounts under owners equity?
    Share Capital and Retained Earnings
  7. What is Share Capital?
    Represents the initial investment in the company
  8. What are Retained Earnings?
    Represents profits left in the business by owners (plus net profit from Income statement).
  9. What are expenses?
    Out flows of economic benefits from the normal course of the business
  10. What is income?
    Inflows of economic benefits from the normal course of the business
  11. What re the 5 accounting conventions studied?
    • 1. Business/ Accounting convention
    • 2. Going concern convention
    • 3. Accounting period convention
    • 4. Dual aspect convention (double entry accounting)
    • 5. Accrual Accounting
  12. What is the Business Accounting Convention?
    • Holds that for accounting purposes, the business and its owner(s) are treated as
    • separate and distinct.
  13. What is the Going concern convention?
    Holds that the business is continuing indefinitely

    Valuation of assets and liabilities based on business continuing normal course
  14. What is the Accounting period convention?
    Holds that the life of the business is divided into given periods of time (usuallyone year) for the purpose of collecting financial information.

    Need to make judgment about when transaction occurred
  15. What is the Dual aspect convention (double entry accounting)?
    • Holds that each transaction has two aspects and that each aspect must be recorded in
    • the financial statements.

    Seen in the accounting equation …
  16. What is Accrual Based Accounting?
    accounting recognises income/expenses on the basis that it has been earned/incurred irrespective of whether the cash receipt is in arrears or in advance.
  17. What are the 4 characteristics of accounting studied?
    • 1. Relevance
    • 2. Reliability 
    • 3.Understandibility

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