basics
What is the accounting equation?
Assets = Liabilities + Owner's Equity.
An increase in an asset is recorded as a debit or credit?
Debit.
What does GST stand for?
Goods and Services Tax.
When are balance day adjustments usually recorded?
At the end of the reporting period.
Which report shows assets, liabilities and owner's equity?
Balance Sheet.
What is an asset?
A resource controlled by the business that provides future economic benefits.
An increase in a liability is recorded on which side?
Credit.
What is Australia's standard GST rate?
10%.
Is prepaid rent an asset or an expense?
An asset, until the rent is used.
Which report shows revenue and expenses?
Income Statement.
What is a liability?
An amount the business owes to others.
An increase in revenue is recorded on which side?
Credit.
An item costs $110 including GST. How much is the GST?
$10 ($110 ÷ 11).
Wages are owed but have not been paid. What is the liability called?
Wages Payable
Which report shows cash inflows and outflows?
Cash Flow Statement.
How do you calculate net profit?
Revenue minus expenses.
An increase in an expense is recorded on which side?
Debit.
What is the GST-exclusive price of an item costing $220 including GST?
$200 ($220 ÷ 1.1).
Cash is received before a service is provided. What is this initially recorded as?
Unearned Sales Revenue, a liability.
Revenue is $8,000 and expenses are $5,500. What is net profit?
$2,500.
What is the purpose of accounting?
To record, report and analyse financial information for decision-making.
The business pays a supplier in cash. Which accounts are debited and credited?
Debit Accounts Payable and credit Cash at Bank.
What does a business generally do if its GST collected is greater than its GST paid?
It pays the net amount to the ATO, subject to applicable GST rules.
Insurance of $1,200 was paid for 12 months. After three months, how much remains prepaid?
$900 ($1,200 − $300 used).
Why might a business make a profit but still have cash flow problems?
Revenue may not have been collected in cash yet, or cash may have been used for other payments.