Chapter 01 Fundamental Accounting Principles

Simple entry – a journal entry that involves only two accounts
Stockholders Equity – Owners Interest in the Assets of a corporation
Which stock has contractual provisions that give cause a preference or priority over common stock? – Preferred Stock
Credit – when you buy property and agree to pay for it later.
Contra Revenue Account – An account with a debit balance, which is contrary to the normal balance for a revenue account.
94. Materiality is based upon which factor(s)?
A. Timeliness of an item.
B. Amount and nature of an item.
C. Consistency of an item.
D. Relevance of an item. – B. Amount and nature of an item.
Input and output vat – Input vat: reduces total vat liability
Output vat: is the vat the company has collected on behalf of the gov, so is a current liability
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Purchases Return – Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer's accounts payable.
source document/business paper – the first record of a business transaction (examples include check stubs, receipts, sales invoices, cash register tapes, etc)
#12. All of the accounts of a business entity taken together comprise the: – ledger
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15. Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as:
A. Investing activities.
B. Management activities.
C. Operating activities.
D. Financing activities. – C. Operating activities.
Accounting equation – Assets = Liability + equity (or capital)
income statement – which financial statement is NET SALES usually found
What is GST not included in? – Wages, drawings, interest received/interest paid, loans received/loan repayment, receipts from debtors, payment to creditors and capital contribution.
Classifying – Sorting & grouping similar items together rather than merely keeping a simple, diary-like record of numerous events

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