Accounting part 1 Flashcards
What is a sole trader?
A form of business where only 1 person owns the business and usually runs the business too.
A sole trader is fully responsible for the debts of the business and also take all the profits of the business.
What is a service business?
Where businesses provide a service in exchange for payment.
What is a trading business?
Where goods (Trading stock) are sold to customers in exchange for payment. (Supermarkets)
What is capital?
The money used to start a business by the owner.
What is owner’s equity?
The owner’s contribution to a business and how much the business is worth.
What are assets?
Money or anything that you own that can be turned into money, including loans and other payments owed to you. Anything that is of value and is durable, and kept for a long time by the business.
What are fixed (non-current) assets?
Land and buildings, vehicles, equipment bought to operate a business efficiently. Their value usually does not change much over a short period of time and are expected to last for a long period of time. They are not bought or sold regularly. (Assets kept longer than 12 months)
What are current assets?
Money in the bank, a cash float/petty cash, as well as trading stock the business has for sale and money owed to the business by debtors. (Assets kept for les than 12 months)
What is income?
Money earned/received by a business.
What are expenses?
The daily running costs of a business.
What is profit?
The amount of money left over after all the expenses are paid.
What is a liability?
Money owed to a person/business/bank.
What are drawings?
What the owner takes out of the business for personal use.
What is a transaction?
A business deal.
What is a source document?
The first document on which a transaction is recorded.
What types of transactions are recorded?
Capital received.
Current Income
Rent Income
What is stationery expense?
Pens and paper.
What is rent expense?
What is paid for premises.
What is wages expense?
The weekly payment to staff.
What is salaries expense?
The monthly payment to staff.
What is advertising expense?
Payment to advertisers for advertising.
What is telephone account expense?
Payment to calls made.
What is water and electricty expense?
Payment to the municipality.
What is fuel expense?
Petrol, Diesel, etc.
What is materials/consumable goods expense?
The things used when rendering (providing) a service.
What are non-current liability?
Liabilities that exist for a period of time longer than 12 months.
What is mortgage bond (Liability)?
A loan to buy a business premises, building usually over 10 years.
What is car finance (Liability)?
A loan to buy a car, usually over 5 years.
What are loans?
When you need to pay back a loan over a longer period than a year.
What are current liabilities?
Short term liabilities that will be repaid within 12 months.
What are creditors (Liability)?
A supplier the business buys goods from on credit.
What is bank overdraft (Liability)?
When the bank allows the business to spend more money than there is in their bank account.
What is tax?
Money owed to the government on personal income or profits earned in the business.
