1What is the monetary theory?
Only business transactions that can be expressed in monetary terms are recorded
2What is the accounting entity theory?
Only business transactions are recorded. Personal transactions by the owner that does not affect the business cannot be recorded in the business books
3What are cash transactions
Payment is made immediatelty during a cash sale or cash purchase
4What are credit transactions?
Payment is postponed/delayed to a later date after the credit sale or purchase
5What is the accounting information system?
It is a computerised system that collects, stores and processes accounting data for the business. Finanical reports are prepared from the system so that stakeholders can use the information for decision-making
6What are the 5 stages of the accounting information system in order?
Source Documents -> Journals -> Ledgers -> Trial Balance -> Financial statements
7What are source documents?
Documents that capture information/details on the business transaction that has taken place
8What are the purposes of source documents?
Providing proof that the transaction occurred. Important information on the docouments should be recorded accurately in the books with both suppliers having same copy
9What is the objectivity theory?
Accounting information recorded must be supported by reliable and verifiable evidence such as source documents so that financial statements will be free from opinions and biases
10What is the historical cost theory?
Transactions should be recorded at their original cost
11What is the purpose of receipt?
Issued by seller to buyer to acknowledge payment received from customers immediately after business has sold goods or provided services
12What is the purpose of invoice?
Issued by seller to buyer to inform credit customers of the amount owed after the business sold goods or provided services on credit
13What is the purpose of credit note?
Issued by seller to buyer to reduce the amount owed by credit customers who were overcharged after goods were returned
14What is the purpose of debit note?
Issued by seller to buyer to increase the amount owed by credit customers who were previously undercharged
15What is the purpose of remittance advice?
Issued by buyer to seller to inform credit supplier that payment by cheque has been made for a certain invoice
16What is the purpose of payment voucher?
Used internally within the business to process payment to credit suppliers that must be approved by authorised personnel and supported by original supplier's invoice
17What is the purpose of bank statement?
Issued by the bank to the business to check and tally against the business records of its cash at bank account