Accounting: revision Flashcards
Accounting Principles
- entity
- going concern
- reporting period
- historical cost
- consistency
- conservative
- monetary unit
Qualitative characteristics…
- relevance
- reliability
- comparability
- understandability
Accounting equation
Assets = Liabilities - Owner’s Equity
Assets…
Resource controlled by entity (as a result of past events), from which future economic benefit is expected
Current >12 months
Non-current
Liabilities
Present obligation of entity (as a result of past events), settlement of which will result in an outflow of economic benefit
Current >12 months
Non-current
Owner’s Equity
Residual interest in the assets; after the liabilities are deducted
Revenue
- inflow of economic benefits
- increase in assets (or decrease in liabilities)
- increase in owner’s equity (not capital)
Expenses
- outflow of economic benefit
- decrease in assets (or increase in liabilities)
- reduces owner’s equity (not drawings)
Internal finance…
- capital contribution
- retained earnings
External finance…
- bank overdraft
- term loan
Types of source doc.
- cash receipts
- cash register roll
- cheque
- cheque butt
- sales invoice (credit)
- memo
What is GST?
- goods and service tax
- included when selling good and providing service
- 10% calc.
- capital, drawing, wages=no tax
GST payable?
- GST owed to ATO
- when GST received is greater than; GST payed
GST receivable?
- GST owed to business by ATO
- when GST payed is greater than; GST received
GST settlement?
Payment made to ATO; to settle GST payable
GST refund?
Cash received from ATO; to clear GST receivable
What is Profit?
When revenue is greater than expenses
Internal control mech.
- separation of duties
- rotation of duties
- effective employee training
Cash control…
- payments made by cheque
- cash procedures changed periodically
- not all cash kept on premises
Types of reports
- accounting equation
- balance sheet
- cash journals
- statements of receipts and payments
- income statement
- budgets (all of above)
- variance report (all of above)
Accounting Process…
Source doc.> Recording> Reporting> Advice
Difference between Bank Overdraft and Cash Deficit…
- bank overdraft= a negative bank balance
- cash deficit= a decrease in the level of cash
Budgeting process?
-predicting the financial consequence of a future event
Define: Cash Budget
accounting report that predicts:
- future cash receipts and payments
- possible cash; deficit or surplus
- estimated bank balance at end of month
Define: Variance
accounting report; that compares actual to predicted reports
Favourable or Unfavourable?
-(F) cash is higher than expected [cash received/revenue]
cash is lower than expected [cash payments/expense]
-(U)cash is lower than expected [cash received/revenue]
cash is higher than expected [cash payments/expense]
