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Details Title: Account Theory SEM1 Description: Semester one exam theory Total Flash Cards: 9 Created: 05/21/2004 03:20:15	To study from this set of flash cards, or to create your own your own study flash cards, register HERE. If you are already a registered user, CLICK HERE.
Cards Term Business Entity Definition • A business is separate from the owner of the business. The accounting records of a business are separate from the personal financial records of the owner. • The owner’s contribution to the business is capital in accounting records. • Sole traders and partnerships are only accounting entities. • Companies are both legal entities and accounting entities. Term Going Concern Definition • It’s assumed that once a business has started, it will continue to operate into the foreseeable future. • This allows assets to be recorded at the historical cost in the balance sheet. • This assumption is not followed if there’s evidence that the business will close in the near future hence assets are at their current sale values in the balance sheet. Term Accounting Period Definition • The life of a business is divided into intervals of time known as accounting periods. • A business may have a 12month period for annual profit and Loss and income tax payable on profit earned and shorter periods, e.g., 1-6 months. • At the end of each period a balance sheet is prepared and a profit and loss statement is prepared. Term Monetary Definition • Before it’s recorded an item must have a monetary value. Term Accounting Standard Definition Accounting standards (AASB’s) are used for the provision of useful information to users to ensure uniformity between accounting reports. Term SAC 3 Definition • Is used to identify the qualities that financial reports should have. Two primary qualities of reports are ‘relevance’ and ‘reliability’ • RELEVANCE- A quality of financial information when it can assist users to make decisions about how they will allocate scarce resources, by helping them to predict future events or confirm past evaluations. • RELIABILITY- A quality when that information can be relied upon to faithfully represent, without bias or error, the transaction it represents or is expected to represent. Term SAC 4 Definition • Is to define elements of financial statements like assets, revenue, expenses or OE. • It sets out rules for deciding when an asset, liability etc should be included in a report. • Asset- A property to which a value can be assigned. • Liability- Something fro which somebody is responsible e.g. a debtor. • Revenue-Money that enters a business as a result of a sale of goods and services • Expenses- That value of a resource which has been used in that period. • OE- The value of an asset above liabilities relating to it. Term Accounting Equation Definition A + E = L + OE + R Term Business Types Definition • Sole Trader- Owned by 1 person • Partnership- Owned by 2 or more people (20 Max) • Proprietary Company- Min 1 shareholder (50 max) except professional companies (400 max) • Public Company- Min 1 shareholder (No max), Easy to transfer interests, strict government regulation.