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ACA > Accounting > Flashcards

Accounting Flashcards

1
Q

What does a Statement of profit or loss reflect?

A

The performance of a business over a period of time.

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2
Q

What does a Statement of financial position reflect?

A

The position of business at a point in time.

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3
Q

What is a Company?

A

A business owned by any number of shareholders and operated by directors (who may or may not be shareholders.

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4
Q

What is a Statement of financial position made up of?

A

Assets and liabilities.

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5
Q

What is a Statement of profit or loss made up of?

A

Revenue and expenses.

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6
Q

What two things fall under capital expenditure?

A

Acquiring long-term assets (kept in the business for over a year) OR to improve or enhance the earning capacity of long term assets.

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7
Q

What two things fall under revenue expenditure?

A

For trade purposes including items for resale, raw material, wages etc OR to maintain the existing earning capacity of long-term assets.

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8
Q

What are the 5 main items in the IFAC code of ethics?

A

Integrity, Objectivity, Professional competence and due care, Confidentiality and Professional behaviour.

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9
Q

Example of current liability…

A

Trade payable.

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10
Q

Example of a non current liability…

A

Loan for over 12 months.

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11
Q

What is the accounting equation?

A

Assets=Liability+Capital(opening capital+profit-drawings/dividends)

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12
Q

What is capital?

A

How much the business owes the owner.

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13
Q

What do cash sales affect?

A

Cash.

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14
Q

What will credit sales affect?

A

Trade Receivables.

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15
Q

What will cash purchases affect?

A

Cash.

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16
Q

What will credit purchases affect?

A

Trade payables.

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17
Q

What falls under the DEAD acronym?

A

Expenses, Assets and Drawings/Dividends.

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18
Q

What falls under the CLIC acronym?

A

Liabilities, Income and Capital.

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19
Q

What would be the double entry for a purchase of inventory?

A

Dr Purchases

Cr Cash/Trade payables

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20
Q

What would be the double entry for the sale of inventory?

A

Dr Cash/Trade receivables

Cr Sales income

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21
Q

If the double entry system has been maintained correctly then Total debits=

A

Total credits

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22
Q

What would be the double entry for a sales return?

A

Dr Sales

Cr Trade receivables/Cash

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23
Q

What would be the double entry for a purchase return?

A

Dr Trade payables/Cash

Cr Purchases

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24
Q

Total staff costs=

A

gross salaries + employer’s NICs

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25
Q

What is the correct double entry to record payroll?

A

Dr Wages and salaries-gross salary and employers NICs
Cr Cash-Net salary paid to employee
Cr Income tax-PAYE and employees’ NICs and employer’s NICs

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26
Q

What is the correct double entry to record closing inventory?

A

Dr Closing inventory (sfp)

Cr Closing inventory (cost of sales on statement of profit or loss)

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27
Q

What does delivery inwards come under?

A

Part of cost of sales in statement of P or L.

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28
Q

What does delivery outwards come under?

A

Expense in statement of P or L.

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29
Q

What’s the double entry when you have incurred an expense but not yet paid for it at the year end?

A 
Dr Expense (SPL)
Cr Accruals (SFP)
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30
Q

What’s the double entry for when you have paid for an expense in advance?

A 
Dr Prepayments (SFP)
Cr Expense (SPL)
31
Q

What is the double entry to record closing inventory?

A 
Dr Inventory (SFP)
Cr Closing inventory/Cost of sales (SPL)
32
Q

What two things do you need to make sure of when recording closing inventory?

A

That the inventory is shown on the SFP as an asset and is not included in the cost of sales.

33
Q

How do you value inventory?

A

By using the lower of NRV or Cost.

34
Q

Break down cost. (Valuing inventory)

A

All expenditure incurred in bringing the product or service to its present location and condition. Includes-Materials, import duties, freight, direct costs and production overheads.

35
Q

Break down NRV. (Valuing inventory)

A

Revenue expected to be earned in the future when the goods are sold minus any selling costs or rectification/modification costs to enable sale.

36
Q

Describe LIFO.

A

Assumes that the last goods to be purchased are the first to be sold.

37
Q

Describe FIFO.

A

Assumes that the first good to be purchased are the first to be sold.

38
Q

Describe AVCO.

A

A weighted average price for all units in inventory is calculated. Issues are priced at the average cost and the balance of inventory remaining has the same unit valuation.

39
Q

What is the correct double entry for drawings from inventory?

A 
Dr Drawings (with the cost of inventory taken)
Cr Purchases (with the cost of inventory taken)
40
Q

What is “Gross profit margin on sales”?

A

Where gross profit is expressed as a percentage of sales.

41
Q

What is “Mark-up on cost”?

A

Where gross profit is expressed as a percentage of the cost of goods sold.

42
Q

What does the cost of an NCA include?

A

Purchase price, delivery cost, legal fees and any expenditure that enhances the asset.

43
Q

What does the cost of and NCA not include?

A

Repairs, renewals and repainting. (3 Rs)

44
Q

What is the correct double entry to record the purchase of a NCA?

A

Dr Non-current asset

Cr Bank/Cash/Payables

45
Q

How are NCAs grouped in a sole traders accounts?

A

Each category. E.g. Motor vehicles, fixtures and fittings etc.

46
Q

How are NCAs grouped in a company’s accounts?

A

Under Property, Plant and Equipment.

47
Q

What can depreciation arise from?

A

Use, physical wear and tear, passing of time, obsolescence and depletion.

48
Q

Depreciation (straight line method)=

A

(Cost-Residual Value)/Useful life

49
Q

Depreciation (reducing balance method)=

A

X% x Carrying Amount

50
Q

What is the double entry for depreciation?

A 
Dr Deprecation (SPL)
Cr Accumulated depreciation (SFP)
51
Q

What is the three step process for disposals?

A
  1. Remove the original cost of the NCA from the NCA account.
  2. Remove the accumulated depreciation on the NCA from the “accumulated depreciation” account.
  3. Record the cash proceeds.
52
Q

What is the four step process for disposals through a part exchange agreement?

A 
1. 
Dr Disposals (original cost)
Cr NCA (original cost)
2.
Dr Acc'd dep'n (acc'd dep'n)
Cr Disposals (acc'd dep'n)
3.
Dr NCA (PEA)
Cr Disposals (PEA)
4.
Dr NCA (cash)
Cr Cash (cash)
53
Q

What is a NCA register?

A

A list of all the NCAs in the business broken down by location and asset type.

54
Q

What is an intangible NCA?

A

Assets that are held for the long term which have no physical form. E.g. patents, copyrights, licenses, goodwill.

55
Q

What is goodwill?

A

The excess value of a business above the carrying amount of its assets less its liabilities in its accounting records.

56
Q

What is an irrecoverable debt?

A

A debt which the business believes will never be paid.

57
Q

What is the double entry for an irrecoverable debt?

A

Dr Irrecoverable debts expense

Cr Receivables

58
Q

What sort of an expense is an irrecoverable debt?

A

An administrative expense.

59
Q

What is the double entry for a recovered irrecoverable debt?

A

Dr Cash

Cr Irrecoverable debts expense

60
Q

What is the double entry for an increase in the receivables allowance?

A

Dr Irrecoverable debt expense

Cr Allowance for receivable(s)

61
Q

What is the double entry for a decrease in the receivables allowance?

A

Dr Allowance for receivables

Cr Irrecoverable debt expense

62
Q

What is the double entry if you receive cash from a credit customer that you previously had an allowance for?

A

Dr Cash

Cr Receivables

63
Q

What is the double entry if you have to write off a debt from a credit customer that you previously had an allowance for?

A

Dr Irrecoverable debts expense

Cr Receivables

64
Q

What is the double entry if you have to write off a debt from a credit customer and the debt is subsequently recovered?

A

Dr Cash

Cr Irrecoverable debts expense

65
Q

What happens to unknown transactions in an accounting system?

A

They are recorded in a temporary account known as a “suspense account” to be investigated by an accountant.

66
Q

Float=

A

Cash in petty cash box + Sum total of expense vouchers since last reimbursement

67
Q

What is the double entry to record the depreciation charge for the year?

A

Dr Depreciation charge

Cr Accumulated depreciation

68
Q

Is VAT indirect or direct?

A

Indirect.

69
Q

How do you find the VAT amount from the VAT inclusive figure?

A

VAT Inclusive figure X 20/120

70
Q

What is the double entry for VAT on sales?

A

Dr Receivables account (VAT inclusive price)
Cr Sales (VAT exclusive amount)
Cr VAT account (VAT)

71
Q

What is the double entry for VAT on purchases/expenses?

A

Dr Purchases/Expenses (VAT exclusive amount)
Dr VAT account (VAT)
Cr Payables account (VAT inclusive amount)

72
Q

What is the double entry for a Contra?

A

Dr Payables

Cr Receivables

73
Q

What is the double entry for a dishonoured check?

A

Dr Receivables account

Cr Cash

ACA (4 decks)

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