ACCOUNTING UNIT 2 Flashcards
What is cash surplus?
an excess of cash receipts over cash payments, leading to an increase in a positive bank balance or a decrease in bank overdraft THIS IS GOOD!!
What is cash deficit?
an excess of cash payments over cash receipts leading to a decrease in a positive bank balance or an increase in bank overdraft THIS IS BAD!!!
Does mortgage include or have GST?
EXPLAIN WHY
NO because it isn’t a good or a service
What are in the cash payments journal?
Cash payments
What are in the cash receipts journal?
cash received
Cash receipts definition
accounting record that summarizes all transactions where cash is received from other entities during a particular reporting period
Cash payments definition
accounting record that summaries all transactions where cash is received from other entities during a particular reporting period
What actions can u undertake when theirs a cash deficit or a low closing bank balance or both
Effective advertising to boost fees
Reduce loan repayments ‘
Reduce drawings
Purchase more inventory of supplies using credit facilities
Ask the owner to make a cash contribution
Borrow cash from bank (LAST OPTION)
Organise a Bank Overdraft Facility
What actions can u undertake when theirs a cash surplus or high closing bank balance
Higher loan repayments to reduce debt
The owner can take greater drawings in cash from the business
Upgrade/ purchase newer non-current assets
Expand the business operations or open a new store in a new location
GST RECEIVED
GST received FROM CUSTOMERS on cash transactions
GST PAID
GST paid by the business TO SUPPLIERS on cash transactions
GST RECIEVABLE
GST owed to the business by the ATO when the amount of GST the business has paid to its suppliers is greater than the GST it has been received from customers
CURRENT ASSET
GST PAYABLE
GST owed by the business to the ATO when the amount of GST the business has RECIEVED on it’s fees is greater than the GST it has paid to its suppliers
CURRENT LIABILITY
GST REFUND
a cash receipt from the ATO to clear GST receivable (cash receipt)
GST SETTLEMENT
a payment made to the ATO by a small business to settle GST PAYABLE (cash payments )
GST FORMULA
Opening balance of GST:
+ GST received from customers
- GST paid to suppliers
+ GS refund ( to settle previous GST receivable)
- GST settlement ( to settle previous GST payable)
= GST BALANCE
Expenses
DEFINITION
EXAMPLES
is a decrease in assets (or in increasing liabilities) that reduces owners equity (EXCPET DRAWINGS ARE NOT ADDED)
NO LASTING BENEFIT CONTINOUS PAYING BACK
wages
electricity
insurance on loan
Revenue
DEFINITION
EXAMPLES
an increase in assets (bank or Accounts receivable) or reduction in liabilities that leads to an increase in owners equity(except for capital contribution)
SALES
FEES
INTRESET ON INVESTEMENT
only these 3 in Y10
What is the template of OE’s section of Balance sheet
Capital ___
Plus/ Less NET PROFIT ___thevalue__
total of this ______________
Less Drawings ____ Total Overall ____
Net Profit margin FORMULA
AND WHAT DOES IT MEASURE
NPM= Net Profit/ Net Sales x100
Provides indication of the profitability of the business that asses ability of a business to generate a profit against a base of sales
STRATEGIES TO IMPROVE PROFITABILITY
- Renegotiate with existing supplier to secure cheaper price for supplies
2.Change supplies to access a cheaper price for materials - Buy materials in bulk to access a discount making materials
- Review staff rostering in order to decrease wages
- Effective marketing/ advertising to boost sales
- Improve service delivery in order to build positive word to mouth in the market- boost sales
