POA chapter 1

• what is a trading business?

  Trading business is a business that buys from suppliers and sells goods to the customers
• what is a service business?

  Service business is a business that provides services to its customers
• what are some examples of trading businesses?

  bookshops, supermarkets, ice cream café
• what are some examples of service businesses?

  cleaning, medical, banking services
• state 3 stakeholders - suppliers, customers, government
• what is the supplier's interaction with the business?

  supplies goods/services to the business
• what is the customer's interaction with the business?

  buys good/services from the business
• what is the government's interaction with the business?

  enforce tax regulation
• what is an example of a decision for a supplier?

  whether to sell to the business on credit, depending on its ability to pay
• what is an example of a decision for a customer?

  whether to buy from the business depending on the business' ability to provide the goods/services they need and goods after-sales service
• what is an example of a decision for a government?

  whether the business complies with tax regulations and decides the amount of tax to collect from the business
• give 3 examples of accounting information - cost of inventory, cost of supplies, cost of services
• give 3 examples of non-accounting information - return policy, warranty, reputation of supplier
• what is the role of accounting?

  provide accounting information for stakeholders to make informed decisions regarding the management of resources and performance of the business
• what is the role of accountants?

  provide accounting information for decision making, set up an accounting information system and become stewards of business
• what are the 2 professional ethics of an accountant?

  integrity and objective
• explain integrity - straightforward and honest in all professional relationships
• explain objective - not let bias, conflict of interest or the undue influence of others override his/her professional judgement
• state 2 things about sole proprietorship?

  1. it is owned by one person who contributes capital to set up the business
  2. the SP exists as long as the owner is alive and desires to continue operation
  3. only owner may hire professionals to help him/her
• state 2 things about limited liability partnership?

  1. owned by 2 or more partners where each partner contributes capital to set up LLP
  2. the LLP exists until wound up or struck off
  3. partners may hire professionals to help them
• state 2 things about private limited company?

  1. owned by 50 or less shareholders where each of them buys shares and contributes capital
  2. company exists forever until wound up or struck off
  3. company hires professionals to manage business on behalf of shareholders
• what are some accounting theories?

  Going concern, Objectivity, Accounting period, Accounting entity, Monetary
• explain Going concern?

  business is assumed to have indefinite economic life
• explain objectivity?

  accounting information recorded must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases
• explain accounting period?

  life of business is divided to time intervals
• explain accounting entity?

  activities of business are separate from actions of the owner. all transactions are recorded from point of view of business
• explain monetary?

  only business transaction that can be measured in monetary terms are recorded