What is income in accounting?

Income is the amount earned from the activities by the business.

Revenue is the value of a business’s sales of goods or services.

Profit is the difference between a business’s income and expenses.

Assets are resources a business owns or controls that are expected to provide future benefits.

What are liabilities?

Liabilities are amounts owed by a business to others that must be repaid.

What is equity in a business?

Equity is the claim by the owners on the net assets of a business.

What is the difference between internal and external stakeholders?

Internal stakeholders are people responsible for the day-to-day running of the business but external stakeholders are not involved in the day-to-day running of the business. An example of an internal stakeholder is the managers and an example of an external stakeholder is the investors.

How do internal stakeholders influence a company's success compared to external stakeholders?

Internal stakeholders, such as employees and managers, directly impact the company's operations and culture, while external stakeholders, like customers and suppliers, influence the company through their needs and expectations. For instance, internal stakeholders can drive innovation, whereas external stakeholders can affect market demand.

Name two internal stakeholders.

1) Owners / Shareholders 2) Managers 3) Employees

Identify two types of external stakeholders.

1) Customers 2) Suppliers 3) Government 4) Competitors 5) Banks / Other lenders

External stakeholder: Customers 1) What is their role in the business? 2) Explain what kind of decision making they will need by using a business accounting information

1) Buy goods and/or services from the business 2) Whether to buy from the business, depending on the business' ability to provide the goods and/or services that they need and good after-sales service

External stakeholder: Government 1) What is their role in the business? 2) Explain what kind of decision making they will need by using a business accounting information

1) Enforce tax regulations 2) Whether the business complies with the tax regulations and decides the amount of tax to collect from the business

External stakeholder: Competitors 1) What is their role in the business? 2) Explain what kind of decision making they will need by using a business accounting information

1) Sell similar goods and/or services 2) Whether the goods/services are comparable to the business and how to improve their own performance

External stakeholder: Suppliers 1) What is their role in the business? 2) Explain what kind of decision making they will need by using a business accounting information

1) Supply goods and/or services to the business 2) Whether to sell to the business on credit, depending on its ability to pay

External stakeholder: Bank / Other lenders 1) What is their role in the business? 2) Explain what kind of decision making they will need by using a business accounting information

1) Make money available to the business and expect it to be fully repaid with interest 2) Whether to grant loans to the business, depending on the business' ability to repay the loan principal and pay interest

Internal stakeholder: Owners / Shareholders 1) What is their role in the business? 2) Explain what kind of decision making they will need by using a business accounting information

1) Contribute capital to the business and expect profit distribution in return 2) Whether to continue to invest in the business or sell the business, depending on the risks and returns related to the business

Internal stakeholder: Managers 1) What is their role in the business? 2) Explain what kind of decision making they will need by using a business accounting information

1) Work for the business and devise strategic plans to run the business efficiently 2) Whether to consider ways to improve the performance of the business

Internal stakeholder: Employees 1) What is their role in the business? 2) Explain what kind of decision making they will need by using a business accounting information

1) Work for the business and perform executive duties 2) Whether to continue working at the business

Explain the importance of an accountant's professional ethics.

As accountants provide information to stakeholders for decision-making purposes, the information needs to be truthful and accurate. Accountants who do not have integrity and is not objective may provide information that mislead users to make poor decisions. Thus, it is important for accountants to have integrity and is objective.

State the difference between a trading business and a service business.

A trading business buys and sells goods to customers while a service business provide services to its customers.

Give two examples of a service business.

Hair salon and web design business

Name two features of a sole proprietorship.

1) It is owned by one person who contributes capital to set up the business. 2) The owner usually runs the business by himself or herself and has absolute control over it.

Name two features of a limited liability partnership.

1) It is owned by two or more partners where each partner contributes capital to set up the business. 2) The business exists forever until wound up or strike off.

Name two features of a private limited company.

1) It is owned by 50 or less shareholders where each investor buys shares and contributes capital. 2) The company exists forever until wound up or struck off.

Introduction to Accounting Flashcards

Student preview

33 questions

Show all answers

1.

FLASHCARD QUESTION

Front

What is accounting?

Back

Accounting is the process of recording, summarising, reporting, analysing, and interpreting financial information of an organisation.

2.

FLASHCARD QUESTION

Front

What is the role of accounting in decision-making?

Back

Accounting provides relevant and timely financial information to stakeholders so they can make informed decisions regarding the management of resources and performance.

3.

FLASHCARD QUESTION

Front

What do accountants do?

Back

Accountants act as stewards of businesses, managing the business on behalf of the owners and providing accounting information for decision-making.

4.

FLASHCARD QUESTION

Front

What is integrity in professional ethics?

Back

Integrity means being straightforward and honest in all professional and business relationships.

5.

FLASHCARD QUESTION

Front

What does objectivity mean in accounting?

Back

Objectivity means being unbiased when making professional judgments in the accounting process.

6.

FLASHCARD QUESTION

Front

What are some examples of accounting information?

Back

Examples include income and profit, cash and assets, liabilities, and return on equity.

7.

FLASHCARD QUESTION

Front

What are some examples of non-accounting information?

Back

Examples include economic outlook and market trends.

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