Application Form (Task 1)

Date 12-January-2019
First Name Saidur
Last Name Rahman
What is Accounting?
Accounting is the process of recording and summarizing financial information in a useful way.
It is a systematic process of identifying, recording, measuring, classifying, verifying,
summarizing, interpreting and communicating financial information. It reveals profit or loss for a
given period and the value and nature of a firm’s assets, liabilities and owner’s equity.

Assets: Something that an entity has acquired or purchased and that has money value. For
Example- Since the car was an asset that Joe owned, it was the first thing seized by the bank
when he could not pay off his loans.

Liability: A claim against the assets, or legal obligations of a person or organization, arising out
of past or current transactions or actions. For Example- Accounts and wages payable, accrued
rent and taxes, trade debt, and short and long-term loans. Owners' equity is also termed a liability
because it is an obligation of the company to its owners.

Revenue: The income generated from sale of goods or services, or any other use of capital or
assets, associated with the main operations of an organization before any costs or expenses are
deducted.

Expenses: Money spent or cost incurred in an organization's efforts to generate revenue,

representing the cost of doing business. Expenses are summarized and charged in the income
statement as deductions from the income before assessing income tax. Whereas all expenses are
costs, not all costs (such as those incurred in acquisition of income generating assets) are
expenses.

Net Income: The total revenue in an accounting period minus all expenses during the same
period. If income taxes and interest are not deducted, it is called operating profit (or loss, as the
case may be). Also called earnings, net earnings, or net profit.
Difference between a Sole Trader, a Partnership and a Private Limited Company:
 A sole trader is one individual person who owns and runs a business on his or her own.
They may have a business name, e.g. Joe Bloggs trading as Bloggs Enterprises or may
trade under their own name.
 The definition of a partnership is where two or more people operate a business together
with a view to making profit.
 A company limited by shares is a separate legal person, i.e. it can own property in its own
right, employ staff and can be sued (and sue) in its own name.
Difference between M0 and M4:
“Narrow” and “Broad” definitions M0 is referred to as the wide monetary base or narrow money
and M4 is referred to as broad money or simply the money supply.
The 0.25% rate rise announced this morning is not a normal interest rate rise. But that is because
we are living through abnormal economic times.
Usually the Bank of England would raise interest rates when the economy was beginning to
“overheat” – that is, when consumer and business demand was accelerating.

Inflation:
1. Erodes Purchasing Power
This first effect of inflation is really just a different way of stating what it is. Inflation is a
decrease in the purchasing power of currency due to a rise in prices across the economy. Within
living memory, the average price of a cup of coffee was a dime. Today the price is closer to two
dollars.
Inflation requires prices to rise across a "basket" of goods and services, such as the one that
comprises the most common measure of price changes, the consumer price index (CPI). When
the prices of goods that are non-discretionary and impossible to substitute – food and fuel – rise,
they can affect inflation all by themselves. For this reason, economists often strip out food and
fuel to look at "core" inflation, a less volatile measure of price changes.
2. Encourages Spending and Investing:
A predictable response to declining purchasing power is to buy now, rather than later. Cash will
only lose value, so it is better to get your shopping out of the way and stock up on things that
probably won't lose value.
Over the long term, equities have been among the best hedges against inflation. At close on Dec.
12, 1980, a share of Apple Inc. (AAPL) cost $29 in current (not inflation-adjusted) dollars.
According to Yahoo Finance, that share would be worth $7,035.01 at close on Feb. 13, 2018,
after adjusting for dividends and stock splits. The Bureau of Labor Statistics' (BLS) CPI
calculator gives that figure as $2,449.38 in 1980 dollars, implying a real (inflation-adjusted) gain
of 8,346%.