Accounts Form 5 Flashcards
Accumulated fund
Clubs- form of capital of this business
Acid test/quick assets ratio
Current assets - closing inventory divided by current liabilities
Accruals concept
Profit is the difference between the revenue and the expenses that helped create that revenue
Business entity concept
Affairs of the owner are to be kept separate from the affairs of the business . Owner is only involved when he puts money into the business capital and when he takes money out-drawings
Consistency concept
Where different methods/systems can be used, one should keep to the same method or system unless another would give a more accurate result
Current ratio
Businesses ability to meet short term debt as thy become due . Worked as : current assets divided by current liabilities
Directors
Persons selected by shareholders of a company to run the company for them
Dividends
Share of profits earned by shareholders in appropriation account amount worked as: % X issued share capital of cents per share X number of issued shares
Equity
Capital
Gross profit to sales ratio
Gp divided by sales X 100
Income and expenditure account
Clubs - comparison between revenue and expenses and replaces income stat for a club. Resulting in a surplus of income over expenditure or a deficit of income over expenditure
Intangible asset
Non current asset that isn’t physical like investment
Interim dividend
Dividend paid part way through year
Inventory turnover / rate of inv turnover
COGS divided by average inventory
Limited liability
If business fails, owners can only lose at the most the value of their investments in the business
Limited liability company
Business where capital is divided into shares brought. Shareholders become owners and receive a dividend and have limited liability
Liquidity ratio
Rates that measure businesses availability of assets that can quickly become cash
Margin -
Calculation of GP based on sales
GP divided by sales X100 or sales X margin = gp
Mark up
Calculation of GP based on cost of goods sold
GP divided by COGS X 100 or COGS X mark up = GP
Net refit to sales
NP divided by sales X100
Ordinary shares
Shares whose holders are owners of company. Have no fixed dividend and are paid after preference shareholders. Carry most risk
Preference shares
Fixed dividend, get paid first . Safest
Rate of inventory turnover
COGS divided by average inventory
Return on capital employed
NP divided by capital employed X 100!
