01/05/2026
Basic Concepts & Principles
1 .What is Accounting? 📈
It is the process of recording, summarizing, and classifying a company's financial transactions over a specific period.
2 .What is the Basic Accounting Equation? 💸
Assets = Liabilities + Equity
What is a Fiscal Year? 📆
A 12-month period used for calculating annual financial statements.
3. What is the Accrual Basis of Accounting? 📝
Revenues are recorded when earned and expenses when incurred, regardless of when cash is exchanged.
4. What is the Consistency Principle? 🔒
Using the same accounting methods and procedures from one period to another to ensure comparability.
5. What is the Matching Principle? 📊
Expenses should be matched with the revenues they helped generate in the same period.
6. What is the Historical Cost Principle? 💰
Assets are recorded at their original purchase price, not their current market value.
7.What is the Monetary Unit Assumption? 💸
Only transactions that can be measured in monetary terms are recorded, using a single currency.
8. What is the Time Period Assumption? 📆
Dividing the economic life of a business into equal time intervals for financial reporting.
9. What is the Full Disclosure Principle? 📝
Reporting all essential information that could influence the decisions of financial statement users.
Key Theories & Methods
10. What is the Going Concern Assumption? 🔄
The assumption that the business will continue to operate indefinitely.
11.What is the Materiality Principle? 🔍
Ignoring items or events that are insignificant and do not impact the overall financial picture.
12. What is the Economic Entity Assumption? 📈
Keeping business transactions separate from the personal transactions of the owners.
13. What is Double-Entry Bookkeeping? 📊
Every transaction affects at least two accounts: one is debited and the other is credited in equal amounts.
14. What is the Conservatism (Prudence) Principle? ⚠️
Recognizing potential losses immediately, but only recognizing profits when they are realized.
15. What is Comparability? 📊
The quality of financial info that allows users to identify similarities and differences between different periods.
16. What is Relevance? 📈
Financial information is relevant if it can influence the economic decisions of users.
17. How are Prepaid Expenses treated? 📝
They are recorded as an Asset and then adjusted (expensed) as they are consumed over time.
18. How is Goodwill calculated? 💼
The difference between the purchase price of a company and the fair value of its net identifiable assets.
19. How is Depreciation handled? 📊
Allocating the cost of a tangible asset over its useful life.
Financial Reports & Procedures
20.How is Revenue recognized under Accrual Basis? 💸
21. When the service is provided or the product is delivered, regardless of cash collection.
22. Difference between Permanent and Temporary Petty Cash? 📈
Permanent (Imprest): Regularly replenished. Temporary: Given for a specific purpose and not replenished.
23. What is the benefit of a Trial Balance? 📊
To ensure that the total of all debits equals the total of all credits.
24.What is the purpose of the Balance Sheet (Statement of Financial Position)? 📈
To show the assets, liabilities, and equity of a company at a specific point in time.
25.What is the purpose of the Income Statement? 📊
To show the results of operations (revenues and expenses) over a specific period.
26.What is a Budget? 📈
A financial plan estimating future revenues and expenses for a specific period.
27.What are Revenue Expenditures? 💸
Short-term expenses required for daily operations (e.g., repairs, salaries).
28.What are Capital Expenditures (CapEx)? 💼
Long-term investments in acquiring or improving fixed assets (e.g., buildings, machinery).
29.What is the importance of Auditing? 🔍
To ensure the credibility of financial statements and compliance with accounting standards.
30. What is the importance of Accounting Standards (e.g., IFRS/GAAP)? 📊
To unify accounting practices and improve the quality and transparency of financial info.
