Accounting Summary Flashcards
How do you calculate Net Capital?
Net Capital - Drawings = Net Capital
How do you calculate closing capital?
closing capital = opening capital + Profit (loss) + capital injections - drawings
What is the accounting equation?
Assets = Capital + Liabilities
How can you rewrite the capital equation?
Assets - Liabilities = Opening capital + profit + capital injections - drawings
How do you calculate profits?
Assets - profits = opening capital + liabilities - drawings
How do you account for a purchase of goods on credit?
Dr Purchases
Cr Cash / Trade Payables
What does the SPL show?
Shows income less expenses over a period of time
Expenses > Income = Loss
How do you account for sales?
Dr Cash
Cr Sales
Dr Trade Receivables (on credit)
Cr Sales
What is DEAD CLIC?
Debit
Expense (SPL)
Asset (SOFP)
Drawings/Dividends (SOFP)
Credit
Liability (SOFP)
Income (SPL)
Capital (SOFP)
How do you account for the sale of goods/inventory?
Dr Cash / Trade Receivables
Cr Sales Income
What is the trial balance?
The trial balance is a list of all the closing balances
How do you account for cash overdrawn?
Cash overdrawn is on the credit side. Rather than an asset it would therefore be a current liability.
How do you account for a sales return?
Originally a credit transaction:
Dr Sales
Cr Trade Receivables
Originally a cash transaction:
Dr Sales
Cr Cash
How do you account for a purchase return?
Originally a credit transaction:
Dr Trade Payables
Cr Purchases
Originally a cash transaction:
Dr Cash
Cr Purchases
How do you account for an early settlement discount on purchases that requires NO adjustment?
On purchase:
Dr Purchases
Cr Payables
On settlement:
Dr Payables
Cr Cash
How do you account for an early settlement discount if they expect to take advantage but do not pay in time?
If they either expect to take advantage but do not pay in time:
On purchase:
Dr Purchases
Cr Payables
On settlement:
Dr Payables (cost inclusive of discount) Cr Cash (actual cost without discount) Dr Purchases (discount charge)
How do you account for an early settlement discount if they do not expect to take advantage but subsequently pay in time?
On purchase:
Dr Purchases (non-discounted price) Cr Payables (non-discounted price)
On Settlement:
Dr Payables (non-discounted price) Cr Cash (discounted price) Cr Purchases (discount total)
How do you calculate total staff costs?
Total staff costs are the Gross salary and the Employer’s National Insurance Contribution (NICS)
Gross salaries + employer’s NICs = total staff costs
How do you calculate what is paid to the employee and what is paid to the government? (Payroll)
Paid to the employee = Gross salary - Net salary
Paid to the government = Total staff costs - (income tax + Employee’s National Insurance Contributions (NICs)
What is the correct accounting for payroll?
Dr Wages and Salaries (gross salary + employer’s NICs)
Cr Cash (net salary paid to employee)
Cr Income Tax (PAYE + employee’s NICs + employer’s NICs)
What is income tax?
The income tax account is a payable account which is shown as a current liability on the SOFP
