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• The four accounting assumptions

  • Period assumption
  • Accrual basis assumption
  • Going concern assumption
  • Accounting entity assumption
• Period assumption


  Financial events are recorded and reported for a specific period of time, allowing valid comparisons of performance to be made
• Period assumption


  • Cash flow statement
• Accrual basis assumption


  Profit for a given period of time is determined by deducting expenses incurred from the revenue earned in that same period
• Accrual basis assumption

  • Income statement
• Going concern assumption


  A business will continue to operate indefinitely and won't be wound up in the near future
• Going concern assumption


  • Balance sheet
• Accounting entity assumption


  A requirement that all relevant items be reported for a business entity, excluding any transactions of the owner and any other entity
• Accounting entity assumption


  • Balance sheet
• Entity


  Any business, organisation, or individual that conducts financial transactions
• Qualitative characteristics of accounting

  • Relevance
  • Faithful representation
  • Comparability
  • Verifiability
  • Timeliness
  • Understandability
• Relevance


  A qualitative characteristic of accounting that required all information that could influence decision makers to be included in accounting reports
• Faithful representation


  A qualitative characteristic of accounting that required information being reported to be complete, without bias and free from error
• Comparability


  A qualitative characteristic of accounting that required financial reports to be prepared so that performance can be compared
• Verifiability


  A qualitative characteristic of accounting that enables accounting information to be checked against business documents
• Timeliness


  A qualitative characteristic of accounting that required information to be presented in a timely manner so that it may influence decisions
• Understandability


  A qualitative characteristic of accounting that required information to be presented clearly and concisely in an understandable fashion
• Breach


  If the rules are not followed, or mandatory details are not added, the documents become invalid and cannot be processed
• Source document types


  • Cheque butts
  • EFT payments
  • Receipts
  • EFTPOS receipts
  • Invoices
  • Credit notes
• Cheque butts


  A document used to verify the details of cash payments made by cheque. Must include: date, payee full name, details, amount, document number
• EFT payments


  A payment made online that transfers cash funds from one business to another. Must include: BSB, account number, date and time, authorisation, total
• Receipts


  A document used to verify the receipt of cash by a business. Must include: receipt number, date, ABN, the amount, details, signature
• EFTPOS receipts


  A document created by an EFTPOS terminal when a customer has paid by credit card, debit card, or gift card. Must include: merchant number, terminal number, type of card, date/time, authorisation, total
• Invoices


  A document used to verify that a credit sale or purchase has taken place. Must include: ABN, tax invoice number, details, GST, total, signature
• Credit notes


  A document issued by a business to verify that goods have been returned. Must include: ABN, credit note, date, reason, GST, total
• Assets


  Present economic resources under the control of a business entity, with the potential to produce future economic benefits
• Current assets


  Are cash and other types of assets held primarily for the purpose of sale or trading, or are reasonably expected to be converted to cash, sold, or consumed by a business within 12 months after the end of the reporting period
• Non-current assets


  Are expected to be used by a business entity for a number of years and are not held for resale
• Liabilities


  Present obligations of an entity to transfer economic resources to another entity to produce economic benefits
• Current liabilities


  Obligations of the entity that are reasonable expected to be settled within 12 months after the end of the reporting period
• Non-current liabilities


  Obligations of the entity that are not required to be settled within 12 months after the end of the reporting period
• Owners equity


  The residual interest an owner has in a business after liabilities are deducted from assets
• Expenses


  Decreases in assets or increases in liabilities that result in a decrease in owners' equity
• Revenue


  Increases in assets or decreased in liabilities that result in an increase in owner's equity, achieved by providing goods or services to customers
• GST liability


  An obligation to the taxation office that exists because the GST collected by a business exceeds the GST it paid to its suppliers
• Calculating GST liability


  GST collected - GST paid
• How GST liability is recorded in cash journals

  In cash payment journals, under sundaes
• Accounting equation


  • Assets = liabilities + owners equity
  • Owners equity = assets - liabilities
  • Liabilities = assets - owners equity
• Cash receipt journals


  A summary of a firm's receipts and payments over a stated period of time
• Cash payment journals


  A daily record of the details of all cash payments