Basic Accounting Terms

What is the difference between accounting and bookkeeping?

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  Accounting involves classifying, summarizing, reporting, analyzing and interpreting financial data, while bookkeeping is the process of recording financial transactions.

• Bookkeeping involves interpreting financial data

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  Accounting is only concerned with recording financial transactions

• Accounting and bookkeeping are the same thing

What are internal users of accounting information?

• Customers who purchase the company's products

• Suppliers who provide goods or services to the company

• Competitors who analyze the company's financial performance

  
  

• Managers within a company who use financial information to make decisions

What is the definition of assets?

• Resources owned by the business that have a monetary value

• Debts and obligations of the business

• Physical possessions of the business

• Liabilities of a business

What is the definition of liabilities?

• Debts or financial obligations that a business owes to others.

• Investments made by a company

• Resources owned by a business

• Money that a company owns

Identify an example of a current asset.

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Identify an example of a non-current asset.

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Identify an example of a current liability.

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What is the difference between current and non-current assets?

• Current assets are expected to have a useful life of one year, while non-current assets are expected to have a useful life of more than one year.

• Current assets are intangible, while non-current assets are tangible.

• Current assets are expected to be used up within one month, while non-current assets are expected to be held for more than one year.

• Current assets are liabilities, while non-current assets are equity.

What is the difference between current and non-current liabilities?

• Current liabilities are always higher than non-current liabilities.

• Current liabilities are due after one year, while non-current liabilities are due within one year.

• Current liabilities are debts owed within one year, while non-current liabilities are debts owed for more than one year.

• Current liabilities are related to assets, while non-current liabilities are related to income.

What is the definition of capital in business?

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  The number of employees in a business

• The total amount of money in a business

• The physical buildings and equipment owned by a business

• Resources invested by the owner in the business