Accounting CBE Flashcards
What are the double entries for Accrued expenses of £500
Dr expenses £500
Cr Accruals £500
What happens to profit and expenses for accrued expenses?
Profit decreases and expenses increase
What are the double entries for prepayments for £10,000 rent
Dr Prepayments £10,000
Cr expenses
What happens to profits and expenses for prepayments?
Profit increases and expenses decrease
What are the double entries for accrued income for £5,000
Dr Accruals £5,000
Cr Income £5,000
What happens to profits and income for accrued income?
Profits increase and income increases
What are the double entries for deferred income for £1,000
Dr income
Cr deferred income
What happens to profits and income for deferred payments?
Profits decrease and income decreases
What is meant by accrued income
Income earned but not received
What is meant by accrued expense
Cost incurred but not received
What is meant by prepayments
payment made in advance i.e rent
What is meant by deferred income
Income received but not earned
What are the double entries for short team leases / operational leases?
Dr Short term lease/Operational lease
Cr Bank
Jamal leases a car for 24 months for £100. The car is valued at £1,000. He makes a deposit of £500.
1) What is the first double entry for the car when purchasing it?
2) What is the double entry for making a deposit and payments?
3) What is the double entry for finance charge/interest for the year
1)
Dr Fixed asset cost - £1,000
Cr Loan creditor - £1,000
2)
Making deposit of £500
Dr Loan credit - £500
Cr Bank - £500
making monthly payments in the year
Dr Loan creditor - £1,200
Cr Bank £1,200
Interest charge - car is worth £1,000. Jamal pays £2,400 +£500 = £2,900 - £1,000 = £1,400 charge divide by 2 (12 months as opposed to 24)
Dr Interest charge/finance charge expense £700
Cr Loan creditor £700
What is the double entry for revenue grants
Dr bank
Cr grant income
How to close grant accounts and move it to p+l
Dr Grant account
Cr grant income
What are the double entries for the disposal of a fixed asset?
DR Disposal account - fixed asset price
CR Fixed asset cost
Transfer provision for depreciation to disposal account
Dr provision for depreciation
Cr disposal account
Recording cash receipt of the sale
Dr bank
Cr disposal account
If profit is made
Dr disposal account
Cr P+L
If loss
Dr P+L
Cr Disposals account
What are the double entries for part exchange of a fixed asset
Dr fixed asset cost
Cr disposal
Dr provision for depreciation
Cr disposal accounts
Dr fixed asset cost account (part exchange)
Cr disposal account
Dr fixed asset cost (once amount deducted for part exchange)
Cr Bank
What is the double entries for research?
Dr research expense
Cr Bank
What is the double entries for Development?
Dr development expense
Cr bank
What are the double entries required to WO research/development expense?
Dr Amortization expense
Cr provision for amortization
How do you calculate depreciation? what is the formula?
Straight line basis - Cost - residual cost / useful life
Reducing balancing method
Cost x % = NBV
How is stock valuation calculated?
Calculated from the lower of cost or NBV which is cost - selling/distribution costs
Whichever is lower
What are the three methods closing stock is calculated?
FIFO
Average
Weighted average method
What are the double entries for a bad debt expense?
DR bad debt expense
Cr Debtors
What are the double entries for a doubtful debt
Dr bad debt expense
Cr provision for doubtful debt
What is the double entry for a bad debt that is now paid?
Dr bank
Cr bad debt expense
What is the appropriation statement in partnership accounts and how is it calculated?
Shows how profit is split between partners
Profit
Less salary
Less interest
Profit sharing ration e.g. 50:50
Total profit share
What are the double entries for allocating profits to Partners?
Dr P+L
Cr Partner accounts
What are the double entries for partners making drawings
Dr Partner accounts
Cr Bank
What is the double entry for when a CT charge is paid?
Dr CT charge expense
Cr Bank
What is the double entry for when a CT charge is calculated?
Dr CT charge (expense)
Cr CT creditors
What is the double entry for ordinary £1 shares which are sold for £1.50. Lets assume 1000 shares sold.
Dr bank £1,500
Cr Share capital £1,000
Cr share premium £500
What is the double entry for an under provision of CT charge
Dr CT tax charge expense
Cr CT creditors
What is the double entry for dividence paid
Dr dividence
Cr bank
What is the double entry for input tax - purchase invoice for £1,200 inclusive of VAT
Dr purchases/expenses - £1,000
Dr VAT account £200
Cr bank £1,200
What is the double entry for an over provision of CT charge
Dr CT creditors
Dr CT tax charge
What are the double entry for the bonus issue of shares?
Dr P+L account reserve
Cr ordinary share capital
What is the double entry for when a company receives income tax? of £1,000
Dr bank £1,000
Dr income tax £200
Cr interest/royalty income £1,200
What is the double entry for the flat rate scheme?
Dr bank
Cr vat control net
CR sales gross
Dr Purchases
Cr bank/creditors
For flat rate scheme you do not recover VAT incurred on purchases but rather pay output VAT at a fixed percentage
What is the double entry for output tax - sales invoice for £1,200 inclusive of VAT
Dr Bank £1,200
Cr Sales £1,000
Cr VAT account £200
What is the double entry for a company paying income tax total £1,000?
Dr interest/royalty expense - £1,000
Cr bank £800
Cr income tax £200
What is meant by permanent differences in accounting? and whats the equation or formula to calculate it
Income shown in accounts but not deducted as an allowable expense i.e business entertainment
Profit + business entertainment - dividence = taxable profit
What is meant by timing differences in accounting? and how do you calculate it equation?
these are differences which arise when income is recognised in different periods of time for the purpose of financial statements e.g. depreciation
Profit before tax + depreciation - capital allowance
Equation to show gross profit as a percentage of sales
Gross profit / sales x 100
Equation to show operating profit before interest and tax?
Operating profit / sales x 100
Equation to show how much operating profit is generated as a percentage of capital?
Operating profit / capital employed x 100
Equation to calculate capital employed?
Capital employed = shareholder funds + long term liabilities
Equation to show how many times value of net assets turned into sales
sales / net assets
What is the equation for net assets?
Net assets = fixed assets + net current assets = capital employed
Equation to show how long stock is held before sold?
Average stock / cost of sales x 365
How to calculate average stock?
Closing stock + opening stock / 2
How to check how long debtors take to pay?
Trade debtors / sales x 365
How to check how long company takes to pay (creditors)
creditors / purchases x 365
Equation to show if a business can meet its short term liabilities with its current assets?
Current assets / current liabilities
equation to show if a business can meet its short term liabilities with its current assets without current stock
current assets - stock / current liabilities
equation to show how much of the business is financed by long term debt
long term liabilities / long term liabilities + shareholder funds x 100
How much the interest is covered by operating profits?
Operating profits / interest payable
Profit earned by issuing of shares?
Profit for the year / number of issued ordinary shares
What is the DR and CR entry for depreciation?
Dr Depreciation (P+L)
Cr provision for depreciation (B/S)
What is a hire purchase agreement and what are some of its features?
- HP is when you hire/rent a vehicle for a period of time.
- you have option to purchase vehicle at end of agreement
- strict legal position - buyer does not own the vehicle until final instalment paid.
But in the accounts we treat it as if it has been bought outright
What is a hire purchase agreement and what are some of its features?
- HP is when you hire/rent a vehicle for a period of time.
- you have option to purchase vehicle at end of agreement
- strict legal position - buyer does not own the vehicle until final instalment paid.
But in the accounts we treat it as if it has been bought outright
What is an operating lease and some of its features
- also known as a short term lease.
- essentially paying/hiring for a service it is using.
- THERE IS NO OWNERSHIP for this vehicle. It is simply hiring vehicle
What is a finance lease and some of its characteristics?
Finance lease is similar to hire purchase. But there is no option to purchase the vehicle at the end.
All risks/rewards transfer to lessee (hirer)
What is revenue grants and what is the accounting entries?
Revenue grants - is a grant received by the government in relation to wages, salaries
DR Bank
Cr Grant Income
What is asset grants? And what are the entries
Asset grants are grants received from the government relating to capital expenditure I.e purchasing of a property for the business or fixed assets.
On receipt of the grant
DR Bank
Cr grant account (deferred income)
On release of the income
DR Grant income (deferred income)
Cr Grant income account (p+l)
What is meant by “goodwill” and explain some characteristics
This is in the case where a business runs successfully and builds a good relationship. The reputation is known as good will.
FRS102 guidance suggests goodwill should be capitalised as a an intangible asset.
This is a chargeable business asset.
If you have depreciation what do you to to profit in operating activities
You add depreciation expense
Operating activities - loss of fixed assets or profit on sale of fixed asset
You add any losses of sales of fixed assets
-And you deduct when profit is made on sale of fixed asset
Operating activities - decrease in debtors and increase in debtors
Add Decrease in debtors
Deduct increase in debtors
Operating activities - decrease in stock, increase in stock
Add decrease in stock/debtors
Deduct increase in stock/debtors
Operating activities - increasing creditors
Decrease in creditors
Add increase in creditors
Deduct decrease in creditors (means more cash outflows)
What are the 4 accounting ratio categories?
Profitability ratios
Efficiency ratios
Short term liquidity ratios
Financing ratios
Name some of the formulas part of profitability ratios
Operating profit margin
Gross profit margin
ROCE - return on capital employed
Name what formulas come under efficiency ratios
Asset turnover
Stock turnover
Debtors/creditors payment period
Name formulas which come under short term liquidity
Current ratios
Quick/acid test
Name some of the formulas which are under financing ratios
Capital gearing
Interest cover
Earnings per share
