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Accounting: All Topics
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Cambridge IGCSE Accounting
Accounting: All TopicsComplete deck
01·1.1 The purpose of accounting
What is book-keeping?
Answer
The systematic recording of a business's financial transactions.
02·1.1 The purpose of accounting
What is accounting?
Answer
Using book-keeping records to classify, summarise, analyse, interpret and communicate financial information.
03·1.1 The purpose of accounting
What is the main difference between book-keeping and accounting?
Answer
Book-keeping records transactions; accounting uses those records to produce and interpret useful information.
04·1.1 The purpose of accounting
What is a financial transaction?
Answer
A business event involving money or a measurable financial amount, such as paying rent.
05·1.1 The purpose of accounting
Why must businesses keep financial records?
Answer
To avoid overlooking transactions and to track money received, paid, owed and earned.
06·1.1 The purpose of accounting
What is meant by financial data?
Answer
Recorded financial facts and figures, such as sales amounts or expense payments.
07·1.1 The purpose of accounting
What does classifying financial data involve?
Answer
Sorting recorded transactions into categories, such as income, expenses, assets or liabilities.
08·1.1 The purpose of accounting
What does summarising financial data mean?
Answer
Combining detailed records into totals and financial statements.
09·1.1 The purpose of accounting
What does analysing financial data involve?
Answer
Examining figures, trends and relationships to understand business performance.
10·1.1 The purpose of accounting
What does interpreting financial data involve?
Answer
Explaining what the analysed figures mean for the business and its decisions.
11·1.1 The purpose of accounting
What does communicating accounting information mean?
Answer
Presenting financial findings to people who need them to make decisions.
12·1.1 The purpose of accounting
What are financial statements?
Answer
Reports summarising a business's financial performance or financial position.
13·1.1 The purpose of accounting
What is profit?
Answer
The amount by which income exceeds expenses over an accounting period.
14·1.1 The purpose of accounting
What is a loss?
Answer
The amount by which expenses exceed income over an accounting period.
15·1.1 The purpose of accounting
Why does a business measure its profit or loss?
Answer
To determine financial performance and guide future business decisions.
16·1.1 The purpose of accounting
What does an income statement show?
Answer
The profit or loss made by a business over a specified period.
17·1.1 The purpose of accounting
Who are interested parties in accounting?
Answer
People or organisations that use a business's accounting information.
18·1.1 The purpose of accounting
Why do owners use accounting information?
Answer
To monitor performance, assess returns and decide how to manage the business.
19·1.1 The purpose of accounting
Why do banks use accounting information?
Answer
To judge whether a borrower can repay a loan and its interest.
20·1.1 The purpose of accounting
Why do trade suppliers use accounting information?
Answer
To decide whether to offer goods on credit and whether the business can pay.
21·1.1 The purpose of accounting
Why do government tax authorities use accounting information?
Answer
To calculate or check the business's tax obligations.
22·1.1 The purpose of accounting
Why do prospective investors use accounting information?
Answer
To assess profitability, risk and whether an investment is worthwhile.
23·1.1 The purpose of accounting
How is an accountant's work related to a book-keeper's work?
Answer
The accountant uses the recorded transactions to prepare, examine and explain financial statements.
24·1.1 The purpose of accounting
Put these accounting processes in order: interpreting, collecting, summarising, recording, analysing, communicating, classifying.
Answer
Collecting → recording → classifying → summarising → analysing → interpreting → communicating.
25·1.1 The purpose of accounting
A business records a cash sale in its books. Is this book-keeping or interpretation?
Answer
Book-keeping: it records a transaction rather than explaining its meaning.
26·1.1 The purpose of accounting
A manager explains why expenses rose faster than sales. Which accounting process is this?
Answer
Analysing and interpreting financial information.
27·1.1 The purpose of accounting
Why compare profit with the previous year?
Answer
To identify whether performance has improved or deteriorated over time.
28·1.1 The purpose of accounting
Why might owners compare profit with a competing business?
Answer
To judge relative performance and identify areas needing improvement.
29·1.1 The purpose of accounting
How can profit information support pricing decisions?
Answer
It helps managers see whether sales revenue covers costs and whether prices or costs need changing.
30·1.1 The purpose of accounting
How can accounting information support cost control?
Answer
It reveals rising or unnecessary expenses so managers can act.