Assets, Revenue, Liability and Expenses Flashcards
Definition of Assets
Items of value to the business
Definition of a non current assets
- Items bought for use in the business
- Not bought to be resold
- Lasting longer than one year
- Land and buildings
- Computers
Definition of current asset
- Items bought to be resold for profit
- Cash, or can be converted to cash
- Customers who owes us money - trade receivables
Definition of a liability
Amounts the business owes
Definition of current liabilities
Amounts we owe - payable within one year
Debt, Overdraft
Definition of Non current Liabilities
Amounts we owe - to be paid back over more than one year
Bank Loans
Definition of expenses
Rent, Wages
Regular ongoing ‘daily/weekly/monthly/yearly’ costs of managing/running the business
Consumer to keep the business operating to generate revenue
Definition of Revenue
Bank Interest received
Sales revenue - income from selling goods or services
Other Revenue- other revenues have the word received in their name - rent received, income received
What are the special accounts
Capital Account- used to record any money put in to the business by the owner
Drawings Account- Used to record any amounts (cash or goods) withdrawn by the owner
Accounting Equation
Assets = Capital (L) + Liabilities
Dual Aspect Concept
Every transaction affects two accounts
Business Entity Concept
The owners finances should be kept separate from the business finances
Debiting an Account
making an entry in the left side of the account
Crediting an Account
Making an entry in the right side of the account
4 types of inventory and if they are debits or credits
Purchases account - AID
Sales account - ADC
Sales Returns account - AID
Purchases Returns account - ADC
Purchases
- Buying Inventory
- From customers
- Inventory Increases
Sales
- Selling inventory
- To customers
- Inventory decreases
Purchases Return
- We return inventory to suppliers
- Inventory decreases
- We receive a credit note
Sales Return
- We have inventory returned to us by customers
- Inventory increases
- We send a credit note
Revenues when recording transactions
They are always entered on the credit side.
Revenues on the right
Expenses when recording transactions
They are always entered on the debit side.
Expenses on the left
What is a trial balance?
A list of all the balances brought down from all the individual accounts
What is a Income statement?
A financial statement to show the calculation of the gross profit and to show the calculation of the profit or loss for the year
How do you work out the profit or loss for the year
Gross Profit + Other Revenues - Expenses = Profit or loss for the year
