accounting1

• What is accounting primarily used for?

  To record financial transactions
• Who is responsible for accounting in a business?

  The person in charge is called an accountant
• Why is accounting referred to as the "language of business"?

  It helps analyze financial performance
• What are the main processes involved in accounting?

  Identifying, measuring, recording, and communicating
• Who are the primary users of financial accounting information?

  Decision makers outside the entity
• What is the focus of cost or management accounting?

  Providing information for internal decision-making
• What does bookkeeping involve?

  Identifying and recording economic events
• What are the steps in the accounting cycle?

  1. Journals
  2. Ledger
  3. Trial Balance
  4. Adjusting Entries
  5. Post-adjusted Trial Balance
  6. Financial Statements
  7. Source documents
• How are users of accounting information categorized?

  As internal users or external users
• Who are considered internal users of accounting information?

  Employees and management
• What are the branches of accounting?

  • Financial Accounting
  • Cost Accounting
  • Management Accounting
  • Taxation
  • Auditing
  • Forensic Accounting
• What are the three main forms of business organizations?

  Sole proprietorship, partnership, and company
• What are the main differences among sole proprietorship, partnership, and company?

  • Ownership: Single person, multiple persons, unlimited shareholders
  • Management: Owner, partners, Board of Directors
  • Liability: Unlimited, unlimited, limited to investment
• What is the historical cost concept in accounting?

  Assets recorded at original cost
• What does the money measurement concept state?

  Only monetary measurable activities are recorded
• What is the going concern assumption in accounting?

  Business will continue for the foreseeable future
• What does the separate entity concept imply?

  A business is distinct from its owners
• When is revenue recognized according to the realization concept?

  When the customer incurs liability for goods
• What does the dual aspect concept state?

  Assets equal claims against those assets
• What is the accounting equation?

  Assets = Capital + Liabilities
• What does the accrual basis of accounting state?

  Revenue and expenses recognized when incurred
• What is the time interval concept in accounting?

  Accounts prepared at regular intervals
• What does the stable money concept assume?

  The value of a dollar remains unchanged
• What are the fundamental accounting concepts?

  • Materiality
  • Prudence
  • Consistency
  • Substance Over Form

  
• What does materiality mean in accounting?

  Importance affecting judgment of financial position
• What is the prudence concept in accounting?

  Be cautious and recognize losses early
• What does consistency mean in accounting?

  Use the same accounting method consistently
• What does substance over form mean in accounting?

  Account for transactions based on their substance
• How should stock bought on credit be treated?

  Show stock as if legally owned
• What is the significance of the dual aspect concept?

  It underlies double entry bookkeeping
• What does the realization concept dictate about revenue recognition?

  Recognize revenue when liability is incurred
• What is the purpose of the time interval concept?

  To prepare accounts at regular intervals
• What does the stable money concept disregard?

  The effects of inflation or deflation
• What happens if fundamental accounting concepts conflict?

  Fundamental concepts take precedence
• How does the prudence concept affect expense recognition?

  Provision for known expenses must be made
• What does consistency in accounting ensure?

  Stability in financial reporting methods
• How should transactions be presented according to substance over form?

  Based on their financial reality
• What is the implication of the dual aspect concept for accounting entries?

  Every transaction affects two accounts
• What does the accrual basis of accounting emphasize?

  Recognizing revenue and expenses when incurred
• What is the accounting period referred to in the time interval concept?

  The regular interval for preparing accounts