3 Lecture
MGT101
Midterm & Final Term Short Notes
Systems of Accounting and Some Basic Terminologies
Systems of accounting refer to the various methods used by businesses to record and report their financial transactions. Some of the commonly used systems of accounting include cash basis accounting and accrual basis accounting. Basic terminolog
Important Mcq's
Midterm & Finalterm Prepration
Past papers included
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What is the primary purpose of accounting? a) To maximize profits b) To maintain accurate financial records c) To minimize expenses d) To reduce tax liability Answer: b) To maintain accurate financial records
What is the difference between cash basis accounting and accrual basis accounting? a) Cash basis accounting records transactions as they occur, while accrual basis accounting records transactions when payment is received. b) Cash basis accounting records transactions when payment is received, while accrual basis accounting records transactions as they occur. c) Cash basis accounting is used by small businesses, while accrual basis accounting is used by large corporations. d) Cash basis accounting is only used for tax purposes, while accrual basis accounting is used for financial reporting. Answer: b) Cash basis accounting records transactions when payment is received, while accrual basis accounting records transactions as they occur.
What is an asset in accounting? a) Something a business owes b) Something a business owns c) A business's profits d) A business's expenses Answer: b) Something a business owns
What is a liability in accounting? a) Something a business owes b) Something a business owns c) A business's profits d) A business's expenses Answer: a) Something a business owes
What is equity in accounting? a) The amount of money a business owes to its creditors b) The amount of money a business owes to its shareholders c) The value of a business's assets minus its liabilities d) The value of a business's assets plus its liabilities Answer: c) The value of a business's assets minus its liabilities
What is revenue in accounting? a) The money a business owes to its creditors b) The money a business owes to its shareholders c) The amount of money a business earns from its sales d) The amount of money a business spends on its expenses Answer: c) The amount of money a business earns from its sales
What are expenses in accounting? a) The amount of money a business earns from its sales b) The amount of money a business spends on its assets c) The amount of money a business owes to its creditors d) The amount of money a business spends on its operations Answer: d) The amount of money a business spends on its operations
What is profit in accounting? a) The difference between revenue and expenses b) The value of a business's assets minus its liabilities c) The amount of money a business owes to its creditors d) The amount of money a business owes to its shareholders Answer: a) The difference between revenue and expenses
Which accounting system is commonly used for financial reporting? a) Cash basis accounting b) Accrual basis accounting c) Hybrid accounting d) None of the above Answer: b) Accrual basis accounting
What is the purpose of the chart of accounts in accounting? a) To list a business's liabilities b) To list a business's expenses c) To list a business's assets d) To categorize a business's financial transactions Answer: d) To categorize a business's financial transactions
Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included
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What is the purpose of the accounting equation, and how is it expressed? Answer: The accounting equation expresses the relationship between a business's assets, liabilities, and equity. It is expressed as: Assets = Liabilities + Equity. The purpose of the accounting equation is to ensure that a business's financial statements are accurate and balanced.
What is double-entry accounting, and why is it important? Answer: Double-entry accounting is a system of accounting where every financial transaction is recorded in two different accounts, with one account being debited and the other being credited. This system is important because it ensures that all transactions are accurately recorded and that the financial statements are balanced.
What is the difference between a balance sheet and an income statement? Answer: A balance sheet is a financial statement that shows a business's assets, liabilities, and equity at a specific point in time. An income statement, on the other hand, shows a business's revenues, expenses, and net income over a specific period of time.
What is the purpose of a general ledger, and what information does it contain? Answer: The purpose of a general ledger is to record all of a business's financial transactions in a central location. It contains information about each transaction, including the date, amount, accounts debited and credited, and a brief description of the transaction.
What are accounts payable, and how are they recorded in a business's financial statements? Answer: Accounts payable are the amount of money a business owes to its suppliers for goods or services purchased on credit. They are recorded as a liability on a business's balance sheet.
What is depreciation, and how is it recorded in a business's financial statements? Answer: Depreciation is the process of spreading the cost of a long-term asset over its useful life. It is recorded as an expense on a business's income statement.
What is the difference between gross profit and net profit? Answer: Gross profit is the difference between a business's revenue and the cost of goods sold. Net profit, on the other hand, is the difference between a business's total revenue and total expenses.
What is a trial balance, and why is it important? Answer: A trial balance is a report that lists all of a business's accounts and their balances. It is important because it helps ensure that the debits and credits in a business's financial statements are equal and that the statements are accurate.
What is an audit, and why is it important for businesses? Answer: An audit is a review of a business's financial statements and accounting records by an independent third party. It is important for businesses because it helps ensure that the financial statements are accurate and that the business is complying with all relevant laws and regulations.
What is a cash flow statement, and how is it different from other financial statements? Answer: A cash flow statement is a financial statement that shows the inflows and outflows of cash in a business over a specific period of time. It is different from other financial statements because it focuses solely on cash transactions and does not include non-cash items such as depreciation.