Accounting

The financial information provided by an accounting system is needed by:

• Owners

• Creditors

• Management

• All of the above

Answer explanation

The financial information from an accounting system is essential for owners to assess profitability, creditors to evaluate creditworthiness, and management for decision-making. Therefore, the correct answer is 'All of the above'.

Double entry system of accounting means:

• Entry in two sets of books

• Entry on two dates

• Entry for two aspects of the transaction

• Entry for one aspect of transaction

Answer explanation

The double entry system of accounting records each transaction in two aspects: debits and credits. This ensures that the accounting equation remains balanced, making 'Entry for two aspects of the transaction' the correct choice.

The systematic recording of financial transactions in a ledger is referred to as:

• Financial Reporting

• Accounting

• Bookkeeping

• Transaction Management

Answer explanation

The correct term for the science and art of recording business dealings is 'Bookkeeping'. While accounting encompasses broader financial management, bookkeeping specifically refers to the accurate recording of transactions.

The statement showing the financial position of a business at a particular time is known as the:

• Financial Statement

• Balance sheet

• Income Statement

• Bank statement

Answer explanation

The balance sheet is a financial statement that provides a snapshot of a business's assets, liabilities, and equity at a specific point in time, making it the correct answer to the question.

The process of recording, classifying, and summarising all business transactions in order to know the financial result is called ______.

• Bookkeeping

• Accounting

• Journalising

• None of these

Answer explanation

The process of recording, classifying, and summarising business transactions to determine financial results is known as accounting. Bookkeeping is a part of accounting, but accounting encompasses a broader scope.

It is the book of final entry.

• Journal

• Ledger

• Trial Balance

• Financial Statements

Answer explanation

The ledger is known as the book of final entry because it summarizes all transactions recorded in the journal, providing a complete record of all accounts. This makes it the correct answer.

It states that there should always be at least two accounts affected in every transaction and for every debited account there should be a corresponding credited account.

• GAAP

• DOUBLE-ENTRY BOOKKEEPING SYSTEM

• ACCOUNTING PRINCIPLES

• PACIOLI'S RULE

Answer explanation

The statement describes the principle of the DOUBLE-ENTRY BOOKKEEPING SYSTEM, which requires that every transaction affects at least two accounts, ensuring that debits and credits are always balanced.

How do we record payment of salaries to employees?

• debit cash

  credit accounts receivable

• debit accounts payable

  credit cash

• debit cash

  credit salaries expense

• debit salaries expense

  credit cash

Answer explanation

To record salary payments, we debit salaries expense to recognize the cost incurred and credit cash to reflect the outflow of cash. This accurately captures the transaction in the accounting records.

It needs cash to pay its expenses, to pay bank loans, to pay taxes and to purchase new assets

• Income Statement

• Balance Sheet

• Cash Flow

• Bookkeeping

Answer explanation

The statement highlights the need for cash to cover various expenses, which is the primary focus of a Cash Flow statement. It tracks cash inflows and outflows, making it the correct choice over the other options.

What is a key benefit of using double-entry bookkeeping?

• It simplifies the accounting process

• It ensures accuracy through checks and balances

• It eliminates the need for financial statements

• It allows for easier tax calculations

Answer explanation

The purpose of double-entry bookkeeping is to keep assets and liabilities in balance. Each transaction affects at least two accounts, ensuring that the accounting equation (Assets = Liabilities + Equity) remains true.