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NCEA 11 Actg concept

1.1 Concepts NCEA Accounting nz 2013

QuestionAnswer
Assumes that the life of a business is expected to continue into the foreseeable future. Going Concern
Has service potential or future economic benefit Is controlled by the entity, As a result of a past transaction. Asset
Is a reduction in assets or increases in liabilities, other than drawings, which decrease owner’s equity Expense
Is a future sacrifice of assets That the entity is currently obliged to make • As a result of a past transaction Liability
Inflows of cash other assets, or reductions in liabilities other than those relating to contributions by owners, which result in an increase in owner’s equity Income
Assumes that the business’ life may be divided into regular time periods to measure its financial position and provide timely information for decision making Period Reporting
Transactions are recorded at the amount of cash paid or payable at the time of the transaction Historical Cost
States that all transactions are recorded in dollar terms Monetary Measurement
The effects of transactions are recognised when they occur and are reported in the financial statements of the periods to which they relate Accrual Accounting
States that the financial affairs of an entity must be kept separate from the financial affairs of the owner and other entities Accounting Entity (notion)
Interested in the business information to make sure that the business is making a profit and will continue in business. To see if the business has enough security so can raise a bank loan if needed for expansion. read the Financial Statements, profit. Owners information needs (user)
Interested in information that enables them to determine whether their loans and the interest, will be paid when due. Is their sufficient assets for security for a loan? Does the business have a good credit history and rating? Lenders information needs (user)
Suppliers are interested in information that enables them to determine whether amounts owing to them will be paid on time. Suppliers/creditors information needs (user)
Income Divided into revenue and other income Expenses Divided into ‘group 1’ or distribution costs Administrative expenses and Finance Costs are components of what statement? Components of Income Statement
Components Receipts Payments Net increase/decrease in cash for the period Opening bank balance Closing bank balance are components of what statement? Components of a cash budget
Current assets, Non current assets, Property plant and equipment, investment assets, intangible assets, current liabilities, non current liabilities, equity are components of which statement Components of Statement of financial position.
Expenditure whose benefits are consumed (used up) in the current period. They are costs incurred to earn revenue and affect the year’s profit and owners’ equity. E.g paid rates, insurance, registration. Revenue Expenditure
Expenditure on items that will benefit the business beyond the current financial period. It creates an asset and does not affect Equity. Eg purchase of building, installing new equipment, improvements to an existing asset that extends its useful life Capital Expenditure
Depreciation is the systematic allocation of the depreciable amount(cost) of an asset over its useful life. Depreciation
Assumes the use (consumption) of economic benefits the asset can provide occurs evenly over its useful life eg The wear and tear on the outside of a Building is consistent each accounting period. Straight line depreciation method
Assets – liabilities The residual interest in assets after deducting all liabilities of an entity at any point of time. Equity
Profit is an increase in the net assets of a business which is not attributable to contributions by the owners. Profit
(owner) is a one person owned business that solely responsible for everything in the business, all finance, all risk, all profit. They can lose all their property paying for debts. Sole Proprieter
(owners) are two or more people that are jointly and separately responsible for the debts, and share the profit, financing, work and risk. Partnership
(Shareholders) that can sell shares to raise finance, profit is shared by dividends. Has one or more directors, succession is possible. Limited liability (ltd) the risk is limited to the amount of investment (shares) they have invested. Company
a group of members(owners) who make money to provide services to its members or recipients, Finance is gained from subscriptions, donations and grants, profits/surplus is distributed services NOT money. Must be audited. Not for profit (Community Organisation)
(community organisation) protects debts from members. Incorporated Society (Community organisation)
(community organisation) does not protect debts or the organisation from its members. Unicoporated Society (community Organisation)
The purpose is to assist users in making financial decisions. Accounting
Assets whose future economic benefit will be consumed within one accounting period. Current Asset
Assets that will be kept in the business so that the firm can operate in the future. These are the main income producing assets of the firm. Eg Buildings, Computers, Vehicles Property, plant and Equipment
These Assets generally produce income for the firm but are not the main income producing assets. Investment Asset
Assets that have no physical presence but represent an investment by the firm. Eg Trademark, Patents Intangible Asset
Expenses that are incurred in order to organise and run the business. These include all expenses that relate to the business premises. Eg rent, office salaries, telephone, general expenses, office wages, insurance, electricity, rates, accounting fees. Administration Expense
Expenses that are incurred to gain finance. Eg.Interest Finance Cost
Expenses incurred in order to increase sales and promote business. Eg Advertising, wages for door to door salesman. Distribution Cost
Liabilities which we expect to be paid within the next accounting period. It will be necessary for us to have cash to meet these liabilities. Eg Short term bank loan and Accounts Payable. Accounts Payable
Liabilities which will be paid over a period of time beyond the next accounting period. Eg mortgages, hire purchase payments and long term loans Non Current Liabilities
If a transaction cannot be expressed in money values, it will not be recorded in the accounting records. For example, the number of years that the business has been trading will not appear in the financial statements of the business. Limitation of Financial Statements and Monetary measurement
When preparing the accounting records of a business we only include the business’ transactions and exclude those transactions of its owner. For example, the owner’s private car must not be included as a business asset. Accounting Entity
What type of Accountant that checks the accuracy of the financial statements and ensures that the business has met legal requirements. Auditor
What type of Accountant who Calculates the costs of the production of goods and helps to manage these costs. Cost Accountant
What type of Accountant who Prepares the accounting reports and analyses the results. Financial Accountant
What type of Accountant who Supervises the daily running of the accounting systems within the business. Management Accountant
What type of Accountants who are not fully qualified accountants but help the accountants in the processing of accounting information. Accounting Technician (AT)
What type of Accountant Advises a company of the current tax legislation and how much tax that they are required to pay. Taxation Accountant
What is the Accounting equation Assets plus Expenses = liabilities plus owners equity plus Income
Created by: Suzanne Rokstad Suzanne Rokstad on 2013-01-25



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