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A2 accounting > Accounting Unit 3 > Flashcards

Accounting Unit 3 Flashcards

1
Q

Why do companies keep incomplete records

A

To save time and resources for the business

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2
Q

What is the layout of the sales ledger control account

A

Debit. |Credit
B/d. |Receipts
Credit sales. |c/d

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3
Q

What is the layout of the purchase ledger control acc

A

Dr |Cr
Payments |B/d
C/d |Credit purchases

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4
Q

What is the layout of the statement of affairs

A 
Opening capital(closing assets last year)
\+capital introduced
\+profit
-drawings
=closing assets for the year end
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5
Q

What is the layout of an expense account

A

Dr |Cr
B/d accrual |B/d pre payment
Bank |Income statement figure
C/d pre payment |C/d accrual

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6
Q

What is the layout of the income account

A

Dr |Cr
B/d pre payment |B/d accrual
Income statement fig |Bank
C/d accrual |C/d pre payment

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7
Q

What are the reasons you might need to do a cash account in incomplete records

A

If cash is missing
Working Out cash sales
Working out total cash (bal b/d)

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8
Q

How do we reconcile a stock take

A 
Stock as per print out
Less: purchases
Add: purchase returns
Add:sales
Less:sales returns
=stock at years end
Exam tip: remember to adust for markup or margin with sales/ sales returns
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9
Q

What are the two inventory valuation methods and how do they work

A

Fifo- this means first in first out.

Avco- average cost method.

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10
Q

What is IAS 1

A

Title-Presentation of the financial statements

It includes all accounting concepts and states how all financial statements should be presented

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11
Q

What is IAS 2

A

Title - inventories
This is defines how we value inventory(lower of cost or NRV)
Also fifo and avco methods of valuing inventory
Exam tip: prudence and consistency concept

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12
Q

What is IAS 7

A

Title- cash flow statements
This IAS states that all accounts of limited companies must include a cash flow statement it also states how it should be set up

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13
Q

What is IAS 8

A

Title- accounting policy, changes in account estimates and errors
This IAS defines that all companies should have a set of policies that define how they deal with measurements like depreciation and how the accounts are presented. It also say about how we deal with errors from previous reporting periods.

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14
Q

What is IAS 10

A

Title- events after reporting period
This defines how we deal with items of income/expenditure and accruals/pre payments
Exam tip:Accruals concept

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15
Q

What is IAS 16

A

Title- Property, plant and equipment

This IAS is responsible for valuing property plants and equipment this includes what to do with deprecation and revaluation.

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16
Q

What is IAS 18

A

Title- revenues

This IAS is responsible for setting the requirements of when revenue/ income should be recognised

17
Q

What is IAS 36

A

Title- impairment of assets

This defines how a company deals with an impairment, after an impairment a company must value their asset/s at the higher of fair value or value in use

18
Q

What is IAS 37

A

Title- provisions, contingent liabilities and contingent assets

This states that we should on put contingent liabilities in if they are probable and put into the accounts as a provision. Profits should not be realised till they are certain, due to prudence profits should be understated rather then overstated

19
Q

What is IAS 38

A

Title- Intangible assets

This outlines how we deal with intangible assets and states that if it is not purchased we cannot include it in the account as we cannot place a value on it. If purchased we can put it into the accounts.
E.g. Good will

20
Q

What are the benefits and limitations of internal sources of finance

A 
Benefits
No interest or repayments
No loss of control
Limitations
Limited amount
Owner might have other plans for the money 
Conflict with stakeholders
21
Q

What is the conflict between stakeholders when using internal sources of finance

A

If revenue used for financing activities the shareholders are not getting dividend
Where as management want the business to grow
Employees want the revenue to be used for higher wages

22
Q

What are the benefits and limitations of a Debenture loan

A

Benefits
Interest is fixed this helps with budgeting
Dont pay it back till the end this helps with short term liquidity
Limitations
Hard to get one
At the end of the periord could face liquidity problems if you havent save a lump sum to pay it

23
Q

What are the Benefits and limitations of selling shares

A 
Benefits 
Don't have to payback 
Don't have to pay divided
Limitations 
Loss of control
Share holders will expect more dividend
24
Q

What does an appropriation account look like(partnership accounts)

A 
Profit for the year
Less salary
Less interest on capital
Add interest on drawings
Profit=
Split of profits=
25
Q

What does a partners current account look like

A

Parnership acc
Debit. |Credit
B/d if the partner owes money |B/d if the partner is owed money
Interest on drawings |Salary
Drawings |Interest on capital
Share off loss |Share of profit

26
Q

What kind of structural changes can happen in a partnership

A

Changes in the ratios
New partner
Retirement of partner

27
Q

What does the partnership act 1980 state

A

Profits split equally
No salary and interest on capital or drawings
Interest on partners loan is paid 5%

28
Q

What does paris stand for

A 
Purpose
Amount
Repayment
Interest
Security
29
Q

What is the lay out of a cash flow statement

A

Net cash flow from operations
Cash flow from investing activities
Cash flow from financing activities

Net increase/ decrease in cash
Cash at the start of the year
Cash at the end of the year

31
Q

How do we work out operating profit

A 
Increase/decrease in retained earning
\+dividend
\+tax in the income statement
\+interest paid
= operating profit
32
Q

How do we work out net cash from investing activities

A

-Purchase of non current assets
+proceeds from the sale of non current assets
+Dividend received
-interest received

33
Q

How do you work out operating cash flow from operating profit

A

Operating profit
+depreciation
+increase in trade payables or -decrease in trade payables
-increase in inventories or +decrease in inventories
-increase in trade receivables or +decrease in trade receivables
-profit on disposal or + loss on disposal
= cash from operations
- interest paid
- tax paid
=net cash flow from operations

A2 accounting (2 decks)

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