7 - Accounting Flashcards
What are the principals of accounting
Consistency Going concern Matching Materiality Objectivity Prudence Realisation
What is meant by consistency
Consistency of how dare is presented in accounting
Wha is meant by going concern
Assumption that the business is running normally
What is meant by matching
Accounts are done at the same time so figures aren’t distorted
What is meant by materiality
Calculations are realistic for intangible value (reputation)
What is meant by objectivity
Realistic, removing bias
What is meant by prudence
Being conservative with value, not over or under- valueing
What is meant by realisation
Making sure accounts are published on the same day
What is an income statement also known as
Profit and loss account
What is an income statement
A financial statement showing income and expenditure over a year, so a loss or a profit
What is meant by sales, income, revenue and turnover
Money from sales
What is gross profit
Revenue - cost of sales
What is meant by cost of sales
Cost of resources for products sold
What is operating profit
Gross profit - expenses
What is meant by expenses
Salaries, overheads, marketing, research etc costs
What is profit before tax
Operating profit - (interest + depreciation)
What is net profit
Profit before tax - tax
What is retained profit
Net profit - dividends
What are dividends
Share of profits paid to shareholders
What does a balance sheet show
A companies accounts at any one point in time, showing assets, liabilities and share equity
What does a balance sheet do
Give an idea of a firms financial position
What are fixed assets
Something owned by the firm
What are fixed assets also known as
Non-current assets
What are current assets
Assets that are bought and sold in short term
Examples of current assets
Stock, debtors, cash
What is stock compared to the other current assets
Least liquid
What are the three types of stock
Raw materials
Work in progress
Finished goods
What is a debtor
Someone who owes you money
What are the 2 kinds of cash
Cash in hand and cash in bank
What is current liabilities
Money that you owe to people
What are Trade creditors
People you owe money to
Examples of current liabilities
Loans, trade credit, overdraft
What are net current assets also known as
Working capital
What is working capital/net current assets
Money used for the day to day inning of the business (short term transactions)
What is working capital calculated
Current assets - current liabilities
What is equity shareholders funds
Money that has been invested into the business
What is equity shareholders funds also known as
Total capital employed
What is liquidity
The ability to turn an asset into cash
