Accounting test

• Accounting


  A system or tool used for recording, classifying, and summarising financial information and then interpreting the results to various users for decision making
• Conceptual framework


  A set of guidelines that underlie the preparation of financial statements
• Accounting standards


  Principles that guide and standardise accounting practices
• Functions of the Institute of Accountants

  • Regulate the accounting profession in Fiji
  • Registers, deregisters and train accountants
• Accounting concepts


  • Separate entity
  • Accounting period
  • Going concern
• In reality, the assets and liabilities are legally owned by the owner, hence the owner is responsible for all debts
• The number of tasks and transactions will be partially complete, so the financial information will show misleading information
• Accounting standards


  Guides accountants on financial statement preparation
• Ethics


  Moral principles that guide the way an individual behaves
• Role of the accounting profession

  • To act in the public's interest
  • Observe and comply with the ethical code of conduct
• Accountants' code of conduct

  • Integrity - to be honest and straightforward
  • Confidentiality - not to disclose any information to third parties
  • Objectivity - to not allow bias
  • Professional competence - to know their field of work
  • Professional behaviour - to avoid actions that discredit the profession
• Fraud


  An intentional deception that causes its victims to suffer an economic loss
• Types of fraud


  • Bribery - offering something of value for the purpose of influence
  • Cash skimming - unrecorded cash theft
  • Larceny - recorded theft
• Whistle-blower


  A person who exposes any kind of information or activity that is deemed illegal, unethical or not correct within an organisation
• Partnership


  A business structure wherein 2 or more individuals come together for undertaking a lawful business and have agreed to share the profits and losses arising from it
• Reasons for change in partnership ownership

  • Retirement of an existing partner
  • Admission of a new partner
• Condition for change in partnership ownership


  • Approval from all members
  • Retirement under the conditions in the partnership agreement
• Capital adjustment account


  It records any necessary adjustments to the capital of the existing partners when the ownership changes
• Step 1 of change in partnership ownership


  Make the necessary changes to the existing partnership by completing a capital adjustment account
• Advantages of partnership


  • More capital contributed
  • Specialised or skilled partners
  • Easy to manage
  • Not liable to pay tax
  • Less expensive
• Disadvantages of partnership


  • Partnership has limited life
  • Unlimited liability
  • Arising of conflicts
  • Sharing of profits
• Partnership agreement


  Written agreements drawn by the partners themselves setting out their rights, liabilities, duties and profit sharing ratio
• Partnership Act


  Governs the partnership when the partnership agreement is not drawn up