Elements of the Reports
A present obligation of an entity to transfer an economic resource as a result of past events
What is a Liability?
Financial information should be of the real-world economic event it claims to represent: complete, free from material error and neutral
What is Faithful Representation?
The assumption that the records of assets, liabilities and business activities of the entity are kept completely separate from those of the owner of the entity as well as from those of other entities
What is the Accounting Entity Assumption?
Complete the following Entry
Bank + 550, GST Clearing +50, Sales + ?
(Must Identify What side)
What is crediting sales 500?
The process used to generate financial information from financial data leading to the provision of advice to assist decision-making
What is the Accounting Process?
A present economic resource controlled by an entity as a result of past events that is not held for resale and is reasonably expected to be used for more than the next 12 months
What is a Non-current asset?
Source Documents
What is Verifiability?
The assumption that the business will continue to operate in the future, and its records are kept on that basis
What is the Going Concern Assumption?
5/10, n/30
What are credit terms?
Rules of Double-Entry Accounting
What are
Every transaction will affect at least two items in the Accounting equation
The Accounting equation must always balance
Increases the asset and increases owner's equity.
What is Revenue?
Financial information must be capable of making a difference to the decisions made by users by helping them to form predictions and/or confirm or change their previous evaluations
What is Relevance?
The assumption that reports are prepared for a particular period of time, such as a month or year, in order to obtain comparability of results
What is the Period Assumption?
Revenue earned less expenses incurred
What is the Income Statement
recording of inventory in inventory card
Perpetual inventory system
Advertising, Interest
What is an expense?
The need to represent financial data in graphical form
What is Understandability?
Elements of the reports are recognized and reported when they satisfy the definitions and recognition criteria for those elements
What is the Accrual Basis Assumption
Shows the accounting equation
What is the Balance Sheet
Credit sales are recorded here
What is a sales journal?
Residual interest in the assets after liabilities deducted.
What is Owner's Equity?
Having information to uses to help influence their decisions.
What is Timeliness
The need to record additional information
What is the Accrual Basis Assumption?
shows cash inflows and outflows for the period.
What is the Cashflow statement
Credit purchases are recorded here?
What is a purchases journal?