Free QCE Year 11 Accounting Flashcard Review
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What is accounting?
The process of identifying, recording, classifying, summarising and reporting an entity's financial information so users can make informed decisions.
State the accounting equation and one rearrangement.
Assets = Liabilities + Owner's equity; Owner's equity = Assets − Liabilities.
How does an auditor's role differ from an accountant's?
An accountant prepares records, reports and advice; an auditor independently examines them and gives an opinion on whether they are true and fair.
What is a shareholder?
A person or organisation that owns shares in a company, usually with rights (depending on the class of shares) to vote on some company decisions and to receive any dividends paid.
Which business entities have unlimited liability?
Sole traders and partners in a general partnership, because the business is not a separate legal entity from its owners.
What does a separate legal entity mean for a company?
The company can own property, make contracts, sue and be sued in its own name, and it continues when shareholders change.
Service business versus trading business?
A service business sells skills or labour for fees; a trading business buys and resells goods, so it holds inventories and records Cost of Goods Sold.
How is income related to revenue?
Income is the broader term; revenue is income from ordinary activities. All revenue is income, but some income (such as other gains) is not revenue.
Closing owner's equity formula for a sole trader?
Opening equity + capital contributions + net profit − drawings (or − net loss).
What does the Statement of Financial Position show?
Assets, liabilities and owner's equity at a particular date.
Give two reasons net profit can exceed net cash from operations.
Credit sales not yet collected from customers, and cash paid for inventory still on hand or for expenses paid in advance, which are not yet expenses.
Name two transactions that change cash but not net profit.
Buying equipment for cash, and the owner's cash drawings (also loan repayments and capital contributions).
What does the accounting entity concept require?
Only the business's transactions are recorded; the owner's private transactions are kept separate (private payments from the business are Drawings).
Describe the going concern principle.
The business is assumed to continue operating in the foreseeable future, so assets are recorded at cost rather than forced-sale value.
How do you find the GST in a GST-inclusive price?
Divide the GST-inclusive amount by 11 (e.g. $440 ÷ 11 = $40).
Name the three GST classifications.
Taxable (GST charged, credits claimable), GST-free (no GST charged, credits claimable) and input-taxed (no GST charged, credits not claimable).
What is the ABN and why does it matter for GST?
The 11-digit Australian Business Number; a business needs one to register for GST, and it must appear on tax invoices.
Which source document evidences a return of goods sold on credit?
A credit note.
Under perpetual inventory, what two entries does a credit sale need?
Dr Accounts Receivable, Cr Sales and Cr GST Collected (selling price); and Dr Cost of Goods Sold, Cr Inventory (cost).
Journal entry for a purchase return of $300 + GST on credit?
Dr Accounts Payable 330; Cr Inventory 300; Cr GST Paid 30.