Business Accounts Flashcards
Profit calculation
Income - expenditure
What is a balance sheet
List of assets and liabilities
Calculation for net worth or value of business
Total assets - total liabilities
What are the final accounts
Balance sheet and profits &loss accounts after adjustments
What is the trial balance
Profit&loss account and balance sheet as the year progresses
Order of DR / CR
DR on left and CR on right
What is the drawings account
Record of cash withdrawals. Transfer this to capital account at end of accounting period
What is the cash account
Record of recipes in and payments out of the bank account
What are adjustments
Accruals Outstanding bills Work in progress Payments in advance Closing stock Bad and doubtful debts Depreciation
What is the accruals basis
Where income and expenditure are recorded in the period to which they relate, not the period in which payment or recipes happens
Where are adjustments reflected
Each adjustment is reflected on profit and loss account and balance sheet
How to adjust for work in progress
Show estimate value as income in profit/loss account
Show work in progress and work billed as separate items and then add together on profit/loss account
How to adjust for outstanding bills
Current liability on balance sheet
Increased expenses on profit/loss account
Add together outstanding bills and show as accruals
How to adjust for payments in advance
Reduce expenses on profit/loss account by amount of next years benefit
Show amount of advanced payment as current asset on balance sheet
Add together and show as pre-payments on balance sheet
How to adjust for closing stock
Show value of closing stock in trading account as a deduction from purchases in order to calculate cost of goods sold
Shown as current assets in balance sheet
How to adjust for bad debts
Write them off
Deduct amount of bad debt from debtors figure in balance sheet to reduce assets
Add as expense on profit/loss account labelled bad debts
How to adjust for doubtful debts
Calculate value of debtors you think will never pay
List as item of expenses on profit/loss account and provision for doubtful debts
How to adjust for depreciation of assets
Only at end of year
By same amount each year
Balance sheet shows purchase price of assets and depreciation deducted
Referred to as accumulated depreciation
What does each partners separate accounts show
Capital contributed by P
Profit owed to P
Amount withdrawn from business by P
What is an appropriation account
Shows allocation of net profits amount partners
Types of assets and liabilities on balance sheet
Fixed assets
Current assets
Current liabilities
Long term liabilities
What are fixed assets
Not for resale but to improve efficiency of business
What are current assets
Short term assets such as cash and debtors
What are current liabilities
Repayable in 12 months or less from the date of the balance sheet
