Appendix A Reading Notes Flashcards
What is an account?
A section of double entry bookkeeping system that deals with one particular asset, claim, expense or revenue
Where are individual accounts recorded?
In accounts / journal entries
What are examples of accounts?
Equity
Cash
PPE
Sales revenue
Accounts payable
Borrowings
Debits on the…
Credits on the…
Debits on the left
Credits on the right
What is double entry bookkeeping?
Each transaction impacts two or more accounts
What are ‘trading transactions’?
Involving revenue and expenses (sales & purchases
Transactions involving a trade of goods/services. These transactions impact the income statement.
What is the accounting equation?
Assets = Liabilities + Equity
What are the 3 debit accounts?
Dividends, Expenses, Assets
What are the 3 credit accounts?
Liabilities, Equity, Revenue
Are assets & expenses closely linked?
If so, why?
Yes.
This is because assets transform into expenses as they’re used up
Why do businesses summarise their individual accounts periodically?
- To see at a glance how much is in each account
- to check the accuracy of the bookkeeping
What is c/d
Carried down amount
Closing balance
What is b/d?
Brought down amount
Opening balance
What is a trial balance?
A totalled list of the balances on each of the accounts in a double entry bookkeeping system
What is trial balance order?
Assets, Liabilities, Equity, Revenue, Expenses
What must happen to a trial balance before financial statements are produced?
Adjustments
What is the purpose of the income statement?
Shows the company’s profit & loss over a period
Shows the company’s financial performance
What is the profit/loss at the end of a period referred to as?
Net Income
Accumulated deficit if negative
Retained earnings if positive
Where are retained earnings put at the end of an accounting period?
Owners Equity account
What does the balance sheet portray?
non-current/current assets
non-current/current liabilities
equity
What are the 4 financial statements?
SOFP
SOCF
P&L
SOCE
What is the flow of financial statements?
Income statement
Statement of stockholder’s equity
Balance sheet
Statement of cash flows
What is a ledger?
The book in which the accounts are traditionally kept
What are the various divisions in ledgers?
The cash book
The sales ledger
The purchases ledger
The nominal ledger
The general ledger
