-
What are business activities? (2)
- events that occur when a business aquires, uses or sells resources
- claims to these resources
-
What are the three types of business activities?
- Financing
- Investing
- Operating
-
What are financing activities?
When owners/creditors provide resources to a business, and when a business transfers resources to owners/creditors
-
What are Investing Activities?
The aquisition and disposal of long term, non-current resources used by a business
-
What are operating activities?
Activities that are necessary to aquire and sell goods and services
-
What does accounting do for business activities?
- Provides a basis for describing them
- Measures, records, reports and analyses them using accounts
-
What is an account?
An account is a record of increases and decreases in the dollar amount associated with a specific resource or activity.
-
What does GAAP stand for?
Generally Accepted Accounting Principles
-
What are the five Basic (GAAP) Accounting concepts?
- 1. Entity Concept
- 2. Transactions Concept
- 3. Source Documents
- 4. Monetary Unit Concept
- 5. Historical Cost Concept
-
What is the entity concept?
An entity is considered seperate from its owners and other companies
therefore, an owners personal financial activities are not included
-
What is the transaction concept?
A transaction is the exchange of property or services between the business and another entity
therefore, must define the 'parties' involved in every transaction
-
What are source documents?
Business records used as evidence that a transaction has occured (eg contract or receipt)
-
What is the monetary unit concept?
All transactions are quantified and recorded in terms on their monetary value ($)
-
What is the historical cost concept?
A business records its transactions based on the dollars exchaged (the cost) at the time the transaction occurs
-
What is the accounting equation?
A = L + OE
-
What is an asset, liability and owners equity?
- Asset - resources controlled by the business
- Liability - the claims of creditors to a business' resources
- Owners Equity - an owners calims on the business' assets
-
Where do financial funds come from? (2)
- OE - Contributions made by owners to the business and any profits that are kept within the business (retained earnings)
- L - borrowings from external parties
-
What is a revenue and how does it affect the accounting equation?
- Revenue = the amount a business expects to receive through the sale of goods and services (increases owners equity)
- Expense = the amount of resources consumed through aquiring and selling goods/services (decreases owners equity)
-
What is 'posting'?
The process of transferring all transactions from the general journal to specific accounts in the general ledger
-
What is the General Ledger?
A file in which each of a business' accounts and the balances of these accounts are maintained
-
What are the three rules of double entry accounting?
- every transaction has at least one Dr entry and one Cr entry
- one transaction may require a simple, compound or set of entries
- total debits must equal total credits for every transaction (the accounting equation must balance)
-
What is an unajusted trial balance? What does it consist of and tell us?
- Trial Balance - arithmetical check on accuracy of the ledger (ensure that drs = crs)
- It lists all account names and balances
|
|
