Accounting Flashcards
What is a service business
A business that provides a service in exchange for money
Give examples of service businesses
Lawyer, doctor or a plumber
What is a trading business
A business where we sell stock or goods for a profit
Give examples of trading businesses
Pick n pay, Woolworths or the istore
What is a contract of purchase and sale
With every sales transaction, there is one party who is the buyer and one party who is the seller
What must be in agreement whenever a contract of payment and sale occur
Price
Product
Place
Promotion
Trading stock
Goods that a business sells ro other businesses or to consumers
Why is trading stock an asset
It is worth money to the business
Give synonyms for trading stock
Goods, merchandise and stock
What are the advantages of cash purchases
The seller is assured of income immediately
The buyer is sometimes able to buy at a discounted price
Less working capital required
Less administration costs as no accounts need to be managed
What are the disadvantages of cash purchases
The seller may not sell as much stock as a credit seller
The seller may not have as many customers as credit traders
Increased security risks for the seller
The buyer is not able to build up a credit history with cash purchases
What are the 2 different cash purchases made by businesses
C.W.O= Cash with order C.O.D= cash on delivery
What does C.O.W mean
This means that the money for the purchase will be paid when the order is placed
What does C.O.D mean
This means that the money for the purchase will be paid when the goods are delivered to the buyer
What are the different means of cash purchases
Debit cards, efts, credit cards
What are retail businesses
Businesses that sell goods and not services
Cost price + profit = selling price
Cost price = selling price - profit
Profit = selling price - cost price
What is the national credit act
To promote and advance the social and economic welfare or South Africans, promote a fair, transparent, competitive, sustainable credit market and industry and to protect consumers
Source document
A credit invoice. A receipt or bank statement for a direct payment(payment of account). Or credit not(returned or damaged goods)
Go through accounting cycle
Clients
Customer to whom a business sells on credit
Non- current asset
Something of value that the ompany possesses an does nit change value within a year.
Eg vehicles, equipment, land and buildings
Current assets
Something of value that the company possesses, but can change within 12 months
Eg debtors, trading stock, bank
Debtor
A person who owes the company money. A current asset
Creditors
A person who the company owes money to. A current liability
Expense
Decreases your owner’s equity. Rent expense, salaries and wages
Income
Increases your owner’s equity. Rent expense, salaries and wages
