Accounting Information System

What is the accounting equation?

• Assets + Liabilities = Equity

• Assets = Liabilities + Equity

• Assets - Liabilities = Equity

Provide example of assets

• cash, real estate, vehicles

• Salaries expenses, rent expenses, common stock

• Cash flow statements

What is the purpose of a balance sheet?

• To show a company's financial position by listing its assets, liabilities, and equity.

• To summarize a company's all cash flow activities.

• To provide a detailed report on employee performance.

Explain the difference between accounts payable and accounts receivable.

• Accounts payable is money owed by a company, while accounts receivable is money owed to a company.

• Accounts payable and accounts receivable are the same thing.

• Accounts payable is a type of revenue for a company. Accounts receivable refers to expenses incurred by a company.

What is double-entry bookkeeping?

• Double-entry bookkeeping is an accounting system that records each transaction in two accounts to maintain balance.

• An accounting system that only tracks income and expenses.

• A technique used for inventory management. Its will increase the accuracy of financial data.

What are the main financial statements?

• Income Statement, Balance Sheet, Cash Flow Statement

• Revenue Report, Expenses Report

• Profit and Loss Statement, Equity Statement

Define depreciation and its importance in accounting.

• Depreciation is a method of calculating profit margins for a business.

• Depreciation is the allocation of an asset's cost over its useful life.

• Depreciation is only relevant for tangible assets and not for intangible assets.

What is the role of an auditor in financial reporting?

• To ensure that all financial transactions are profitable.

• To provide an independent assessment of financial statements.

• To create budgets and forecasts for future financial performance.

Explain the concept of accrual accounting.

• Accrual accounting is the same as cash accounting. Accrual accounting ignores expenses until they are paid.

• Accrual accounting only records cash transactions and ignore non cash.

• Accrual accounting recognizes revenue and expenses when they are incurred, not when cash is exchanged.

What is the difference between cash basis and accrual basis accounting?

• Cash basis accounting records transactions when cash changes hands; accrual basis accounting records transactions when they occur.

• Cash basis accounting recognizes revenue when earned; accrual basis accounting recognizes expenses when paid.

• Cash basis accounting records transactions at the end of the month; accrual basis accounting records transactions at the beginning of the month.