Business Accounts Flashcards
What financial statements are prepared for each accounting period?
- profit and loss account
- balance sheet
What is bookkeeping?
Process of recording money transactions
What is a nominal ledger?
transactions of a similar type grouped together
What is trial balance?
debit and credit balances at end of accounting period should be the same
What are the classifications of ledgers/accounts?
- Asset
- Liability
- Capital
- Income
- Expense
What are fixed assets?
owned by business to enable profit (held for over a year)
What are current assets?
Cash or items owned which can be quickly turned into cash (within 1 year)
What is the profit and loss account?
records income throughout accounting period minus epxenses incurred
What is the balance sheet?
records position of business in respect of asset, liability and capital accounts
What will a balance sheet tell you?
- net asset value (top half)
- capital invested (bottom half)
What are the types of year end adjustments?
Depreciation
Accruals
Prepayments
Bad debts
Doubtful debts
What are the methods of depreciation?
- straight line
- reducing balance
What is an accrual adjustment?
When expense incurred that should be charged against profit but cant in current year
What is a prepayment adjusment?
Expense paid in current year but should be charged for next year
What is a bad debt?
Business knows with certainty they wont receive it
What are the types of doubtful debts?
Specific doubtful debts
General doubtful debts
How are profits divided in a partnership?
- notional interest on capital
- notional salary
- share of profits according to agreed profit ratio
Why do companies prepare accounts?
Obliged by statute
When do private companies need to file accounts at companies house?
Within 9 months of end of relevant accounting reference period
When do public companies need to file accounts at companies house?
Within 6 months of end of relevant accounting reference period
What are the main differences for financial statements of companies?
- capital accounts include share capital, reserves and retained earnings
- taxed
- dividends paid as appropriation of profits
What is called up share capital?
Aggregate sum that has been called up
What are reserves?
capital of the company in excess of the called-up value of the issued share capital.
What categories can reserves be split into?
Capital reserves
Revenue reserves
