FAC 1502 EXAM PACK: CONCEPTS, CALCULATIONS, FORMULAS & TRANSACTIONS 2022
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FAC 1502 - FINANCIAL ACCOUNTING
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FAC 1502 - FINANCIAL ACCOUNTING
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ABOUT FINANCIAL ACCOUNTING VOLUME 2 (8TH EDITION)
100% TRUSTED explanations, workings, concepts, transactions, calculations and formulas, to help you prepare and achieve a GUARANTEED A+ in your assignments and examinations.
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FAC 1502 - FINANCIAL ACCOUNTING
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BASIC CONCEPTS
Accounting
Accounting involves the recordings of transactions, in order to provide useful information for
decision-making. It is a specialised means of communication that conveys the financial
information of an entity. It is essential that the financial information is presented truly and
fairly. Users of financial information expect it to be accurate and comprehensive.
Accounting Cycle
1. Identify Transactions
2. Record Transactions
3. Post to general Ledger
4. Pre-adjustment Trial Balance
5. Adjustments
6. Post-adjustment Trial balance
7. Prepare Financial Statements
, (IFRS) – International Financial Reporting Standards
Accounting Entity
Any entity for which separate financial records are kept.
Economic Resource
It is a right that has the potential to produce economic benefits.
Economic Benefit
Benefits that can be quantified in terms of money generated. It can also be money saved
when costs are reduced.
Double Entry System
Every transaction has a dual effect on the elements of the Basic Accounting Equation
(BAE). After every transaction the BAE must balance.
Capital
Amount invested by the owner
Drawings
Amount of cash or value of goods withdrawn from the business by the owner for personal
use.
Credit Losses (Bad Debts)
They are losses expected to occur due to debtors not paying their debts to the entity.
Trial Balance
It is a summary of balances of all accounts recorded in the general ledger.
Periodic Inventory
It is an inventory valuation method in which inventories are physically counted at the end of a
specific period to determine the cost of goods sold. Purchase of inventory is recorded
directly into the inventory account at cost price. At the time of sale, the cost price of the
goods sold is transferred from the inventory account to the cost of sales account
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