Accounting UK—IGCSE Flashcards
Define account
A list of all transactions relating to a person, property, income, or expenses
What are the two formats an account can be represented as?
-
T-format:
_____________________________
Debit (Dr) I Credit (Cr)
I
I
I -
Running balance format:
________________________________________________
I Date I Details I Debit I Credit I Balance I
I I I I I I
I I I I I I
Define book-keeping
Recording of business data in chronological order (date wise).
Define accounting
The language of business; the purpose is to provide a means of recording, classifying, summarising (trial balance), interpreting and reporting data.
Define assets
Resources owned by a business (having economic value)
What are the two types of assets?
- Fixed Assets/Non-current Assets
- Current Assets (used up in one year)
What are the two types of fixed assets?
- Tangible: Can be touched and felt (e.g cars, furniture)
- Intangible: Can be felt only (e.g Brandnames, copyright, goodwill (reputation)
What is meant by liabilities?
The amount owed to others
There are two types of liabilities; name them.
- Long-term Liabilities: Payable after a period of one year
- Short-term Liabilities: Payable within one year
Define capital (also known as owner’s equity)
Amount of cash, goods or assets which is initially invested by proprietor (owner) while commencing.
What are three ways in which the accounting equation can be expressed?
- Assets = Liabilities + Capital/Owner’s Equity
- Capital/Owner’s Equity = Assets - Liabilities
- Liabilities = Assets - Capital/Owner’s Equity
Define drawings
The amount of cash withdrawn by the owner from the business for personal use. (It decreases capital)
Define trade
Purchase and sale of goods and services
Define purchases
Goods bought for resale
Define sales
When purchased goods are sold
Define return outwards/purchases return
Goods returned to supplies
Define return in/sales return
Goods returned by customers
Define Stock/Inventory
Unsold goods at the end of a period
Define Expenses
Money spent on goods and services
Define discount
Concession or rebate allowed by a business
What are the two types of discounts?
- Trade Discount: Discount on buying and selling on list/invoice price
- Cash Discount: Discount given or received when money is paid or received
What are the three types of accounts?
- Personal: Related to persons and organisations. E.g. Trade receivables, banks, etc.
- Real: Related to assets of business
- Nominal: Expenses, losses, incomes and gains.
What is a person?
Anything that has identity is known as a person
What is Balance Sheet?
List of assets, liabilities and capital on a specific date
What is a trial balance?
A list of balances on all the accounts in the business.
What are the items that will always appear on the debit side?
- Assets
- Expenses
- Purchases
- Sales return (return in)
- Drawings
What are the items that will always appear on the credit side?
- Owner’s Equity/Capital
- Liabilities
- Sales
- Purchases return (return out)
- Incomes
There are two types of errors. What are they?
- Errors not disclosed
- Errors disclosed
There are 6 types of errors that are not disclosed. Name them.
- Error of omission
- Error of commission
- Error of principle
- Compensating error
- Error of original entry
- Error of complete reversal
What is error of omission?
Transactions that are completely excluded from the books of accounts
What is error of commission?
Transactions recorded in wrong persons account
What is error of principle?
Error made in the account on the same side
What is compensating error?
Two errors of the same amount on two sides cancel each other out
What is error of original entry?
When wrong amount is entered in both debit and credit
What is error of complete reversal of entries?
When debit is recorded as credit and credit as debit
