Summary: Accskills 1

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  • 1 The accounting equation and the statement of financial position

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  • Which seven key ingredients were required before a formal system could be developed?

    1. Private property
    2. Capital
    3. Commerce
    4. Credit
    5. Writing
    6. Money
    7. Arithmetic
  • With which principles must an accountant comply according to the IFAC code?

    1. Integrity
    2. Objectivity
    3. Professional competence and due care
    4. Confidentiality
    5. Professional behaviour
  • With what is accounting concerned with?

    • Recording data
    • Classifying and summarising data
    • Communicating what has been learnt from the data
  • What is the statement of financial position?

    It shows the financial position of an organisation at a point in time, thus it presents a snapshot. It comprises those accounts with balances not included in the income statement.
  • Where is the creditor shown in the statement of financial position?

    In the accounts payable. 
  • 2 The double entry for assets, liabilities and capital inventory

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  • What is a T-account?

    Account with a t-shape.
  • What are the double entry rules for bookkeeping?

    Assets increase -> Debit
    Assets decrease -> Credit

    Liabilities increase -> Credit
    Liabilities decrease -> Debit

    Capital increase -> Credit
    Capital decrease -> debit
  • What do you need to include when making an entry for a transaction?

    - The date of each transaction
    - Cross-reference title of the other account
    - Appropriate column headings
  • How are accounts payable and accounts receivable treated in the accounting books?

    There is a separate account maintained for each creditor and debtor. 
  • What is the rule of benefit?

    Identify the accounts affected by a transaction. Debit the account for which there has been an increase in benefit; credit the account which there has been a reduction in benefit. 

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